Exhibit 2.1
AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
THIS AMENDED AND RESTATED STOCK PURCHASE AGREEMENT (this "Agreement") is
made and entered into as of June 30, 2005, by and among Ardent Health Services
LLC, a Delaware limited liability company ("Seller"), Ardent Health Services,
Inc., a Delaware corporation ("AHS"), and Psychiatric Solutions, Inc., a
Delaware corporation ("Purchaser").
RECITALS:
WHEREAS, Seller, AHS and Purchaser (i) previously entered into a Stock
Purchase Agreement dated as of March 10, 2005 (as amended, the "Original
Agreement") and (ii) desire to amend and restate the Original Agreement;
WHEREAS, Seller owns 100% of the AHS Shares (as defined below);
WHEREAS, AHS owns 100% of the issued and outstanding equity securities of
each of the AHS Subsidiaries (as defined below);
WHEREAS, prior to the consummation of the Seller Stock Sale (as defined
below), AHS will sell the stock of each of the Excluded Subsidiaries (as defined
below) to Seller pursuant to the Excluded Subsidiaries Sale Transaction (as
defined below);
WHEREAS, at the Closing (as defined below), Purchaser wishes to loan to
AHS the Loan Amount (as defined below); and
WHEREAS, Seller wishes to sell the AHS Shares to Purchaser, and Purchaser
wishes to purchase the AHS Shares from Seller (the "Seller Stock Sale") on the
terms, subject to the conditions and for the consideration set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants and other agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following defined terms shall have the
meanings indicated below and, where appropriate, shall include the singular and
plural of the term defined:
"Acquired Entities" shall mean AHS and the AHS Subsidiaries.
"Acquired Entity Employee" shall have the meaning ascribed to it in
Section 6.5.
"Acquisition Proposal" shall mean any inquiries or proposals that
constitute, or are likely to result in, a proposal or offer for a merger,
consolidation, business combination, sale of substantial assets, sale of shares
of capital stock or other securities (including by way of a tender offer) or
similar transaction involving any of the Acquired Entities.
"Affiliate" shall mean any Person that directly, or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with the Person specified.
"Agreement" shall mean this Amended and Restated Stock Purchase Agreement,
including the exhibits and schedules attached hereto.
"AHS" shall mean Ardent Health Services, Inc., a Delaware corporation.
"AHS Shares" shall have the meaning ascribed to it in Section 3.2(b).
"AHS Subsidiaries" shall have the meaning ascribed to it in Section
3.3(a).
"AHS Subsidiary Shares" shall have the meaning ascribed to it in Section
3.3(d).
"AMS" shall mean Ardent Medical Services, Inc., a Delaware corporation.
"Applicable Premium" means, with respect to an Untendered Note the excess
of (i) the present value at the Redemption Date of (A) the redemption price of
such Untendered Note at August 15, 2008 (105% of the principal value) plus (B)
all remaining required interest payments due on such Untendered Note through
August 15, 2008 (excluding accrued but unpaid interest to the Redemption Date),
computed using the Treasury Rate plus one-half of one percent (0.50%), over (ii)
the principal amount of such Untendered Note.
"Applicable Tender Offer Premium" means, with respect to a Senior
Subordinated Note the excess of (i) the present value at the Closing Date of (A)
the redemption price of such Senior Subordinated Note at August 15, 2008 (105%
of the principal value) plus (B) all remaining required interest payments due on
such Senior Subordinated Note through August 15, 2008 (excluding accrued but
unpaid interest to the Closing Date), computed using the Treasury Rate plus
one-half of one percent (0.50%), over (ii) the principal amount of such Senior
Subordinated Note.
"Applications" shall have the meaning ascribed to it in Section 3.24.
"Bank Indebtedness" shall mean the amount of indebtedness outstanding as
of the Closing under the Credit Agreement.
"Balance Sheet Date" shall mean December 31, 2004.
"Bank Refinancing" shall mean the assignment by AHS of a portion of the
indebtedness outstanding under the Credit Agreement to AMS.
"BHC" shall mean Behavioral Healthcare Corporation, a Delaware
corporation.
"Books and Records" shall mean all existing accounting, business,
marketing, corporate, and other files, documents, instruments, papers, books and
records, including without limitation, financial statements, budgets, ledgers,
journals, deeds, titles, policies, manuals, organizational documents, operating
agreements, minute books, stock certificates and books, stock transfer ledgers,
contracts, franchises, permits, supplier lists, reports, computer files and
data, retrieval programs and operating data or plans.
"Business Associate Agreements" shall have the meaning ascribed to it in
Section 3.22(c).
"Business Day" shall mean a day other than Saturday, Sunday, or any day on
which the principal commercial banks located in the State of Tennessee or the
State of New York are authorized or obligated to close under the Laws of such
states.
"Certificate of Need" shall have the meaning ascribed to it in Section
3.24.
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"Claim" shall have the meaning ascribed to it in Section 9.3.
"Closing" shall mean the consummation of the transactions contemplated by
this Agreement as provided in Article II; provided that the Excluded
Subsidiaries Sale Transaction shall occur prior to the consummation of the
Seller Stock Sale.
"Closing Date" shall have the meaning ascribed to it in Section 2.5.
"COBRA" shall have the meaning ascribed to it in Section 3.12(i).
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Commitment Letter" shall have the meaning ascribed to it in Section 4.9.
"Company" shall mean the Acquired Entities on a consolidated basis.
"Company Financial Statements" shall have the meaning ascribed to it in
Section 3.6.
"Company Permits" shall have the meaning ascribed to it in Section 3.17.
"Company Plans" shall mean each "employee benefit plan" (within the
meaning of Section 3(3) of ERISA) and each stock purchase, stock option, other
stock-based, severance, change-in-control, disability, vacation, holiday, sick
leave, fringe benefit, bonus, incentive, deferred compensation, welfare and
other employee benefit plan, program, policy or other arrangement; and any
employment (including severance and change of control) agreement; whether or not
subject to ERISA (including any funding mechanism therefor now in effect or
required in the future as a result of the transactions contemplated by this
Agreement or otherwise); whether formal or informal, oral or written; under
which any employee or former employee or director (or dependent or beneficiary
thereof) of any Acquired Entity or any employee of AHS Management Company, Inc.
listed on Schedule 6.5 has any present or future right to benefits or which has
been sponsored, contributed to or maintained by Seller, any Acquired Entity or a
Controlled Group Member during the past three (3) years.
"Confidentiality Agreement" shall mean that certain Confidentiality
Agreement, dated as of October 28, 2004, between AHS and Purchaser.
"Constituent Documents" shall mean the certificate of formation,
certificate of incorporation, articles of incorporation, bylaws, articles of
organization, operating agreement, limited liability company agreement,
partnership agreement, limited partnership agreement, minute books and such
other organizational or governance documents, as amended to the relevant date,
of a given entity.
"Contract" shall mean any agreement, lease, sublease, license, sublicense,
promissory note, evidence of indebtedness, or other contract to which any of the
Acquired Entities is a party or by which assets of any of the Acquired Entities
are bound.
"Controlled Group Member" shall mean any entity (whether or not
incorporated) other than Seller and the Acquired Entities that, together with
Seller and Acquired Entities, is considered under common control and treated as
one employer under Section 414(b), (c), (m) or (o) of the Code.
"Court Order" shall mean any judgment, order, award or decree of any
federal, state, local or other court or judicial or quasi-judicial tribunal and
any award in any binding arbitration proceeding.
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"Covered Entities" shall have the meaning ascribed to it in Section
3.22(a).
"Credit Agreement" shall mean that certain Credit Agreement, dated as of
August 19, 2003, among AHS, as borrower, the subsidiaries of Seller named
guarantors therein, the lenders party thereto and Citicorp North America, Inc.,
as Administrative Agent (as successor to Bank One, NA), as amended.
"Damages" shall mean any and all losses, damages, claims, costs, fines,
fees, Taxes, penalties, interest obligations and deficiencies (including,
without limitation, reasonable attorneys fees and other expenses of litigation).
"Destruction Notice" shall have the meaning ascribed to it in Section 6.3.
"Effective Time" shall have the meaning ascribed to it in Section 2.5.
"Environmental Claim" means any claim, action, cause of action,
investigation or notice by any Person alleging potential liability (including
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries,
or penalties) arising out of, based on or resulting from: (i) the presence or
release or threat of release into the environment of any Materials of
Environmental Concern at any location, whether or not owned or operated by any
of the Acquired Entities; or (ii) circumstances forming the basis of any
violation or alleged violation of any Environmental Law.
"Environmental Laws" means, as they exist on the date of the Original
Agreement and as of the Effective Time, all applicable United States federal,
state, local and non-U.S. Laws relating to pollution or protection of the
environment (including ambient air, surface water, ground water, land surface or
sub-surface strata), including laws and regulations relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern, including, but not
limited to Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. Section 9601 et seq., Resource Conservation and Recovery
Act ("RCRA"), 42 U.S.C. Section 6901 et seq., Toxic Substances Control Act
("TSCA"), 15 U.S.C. Section 2601 et seq., the Clean Air Act, 42 U.S.C. Section
7401 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., each as may
have been amended or supplemented, and any applicable environmental transfer
statutes or laws.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Excluded Assets" shall have the meaning ascribed to it in Section 2.2.
"Excluded Liabilities" shall have the meaning ascribed to it in Section
2.2.
"Excluded Subsidiaries Sale Transaction" shall mean (i) the transfer of
the assets and liabilities set forth on Schedule 1(a) from AMS and its
subsidiaries to BHC, (ii) the transfer of the assets and liabilities set forth
on Schedule 1(b) from BHC and its subsidiaries to AMS and (iii) the sale of all
the issued and outstanding stock of the Excluded Subsidiaries by AHS to Seller
in consideration of a note issued by Seller payable to the order of AHS in the
principal amount of $374,483,240.32 and due immediately following the Closing
(the "Seller Promissory Note").
"Excluded Subsidiaries" shall have the meaning ascribed to it in Section
3.3(a).
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"Exemption Certificate" shall have the meaning ascribed to it in Section
3.24.
"Federal Privacy Regulations" shall have the meaning ascribed to it in
Section 3.22(c).
"Federal Transaction Regulations" shall have the meaning ascribed to it in
Section 3.22(c).
"GAAP" shall mean generally accepted accounting principles in the United
States of America, consistently applied during the periods involved.
"Governmental Authority" shall mean any national, state or local
government, any political subdivision thereof or any other governmental,
quasi-governmental, judicial, public or statutory instrumentality, authority,
body, agency, department, bureau, commission or entity, or any arbitrator with
authority to bind a party at law.
"Hazardous Substances" shall mean any toxic or hazardous waste, pollutants
or substances, including, without limitations, friable asbestos, polychlorinated
biphenyls, petroleum products, byproducts, or other hydrocarbon substances,
substances defined or listed as a "hazardous substance," "toxic substance,"
"toxic pollutant" or similarly identified substance or mixture, in or pursuant
to any Environmental Law.
"HIPAA" shall have the meaning ascribed to it in Section 3.22(d).
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnifying Party" shall have the meaning ascribed to it in Section 9.3.
"Indemnitee" shall have the meaning ascribed to it in Section 9.3.
"Intellectual Property" shall have the meaning ascribed to it in Section
3.16.
"JCAHO" shall have the meaning ascribed to it in Section 3.25.
"Knowledge" means (i) in the case of a natural Person, the actual
knowledge of such Person based upon a reasonable investigation regarding the
accuracy of any representation or warranty contained in this Agreement and (ii)
in the case of any other Person, the actual knowledge of the executive officers,
division presidents, division vice presidents of financial operations, division
vice presidents of operations, general partner or other natural Person
fulfilling similar duties on behalf of or with respect to such Person based upon
a reasonable investigation regarding the accuracy of any representation or
warranty contained in this Agreement.
"Laws" shall mean all statutes, laws, ordinances, rules, regulations and
other pronouncements of any Governmental Authority having the effect of law in
the United States, any state or commonwealth of the United States, or any city,
county, municipality, department, commission, board, bureau, agency or
instrumentality thereof.
"Leases" shall have the meaning ascribed to it in Section 3.11(c).
"Lender" shall mean Citigroup North America, Inc. or an affiliate thereof.
"Liability Threshold" shall have the meaning ascribed to it in Section
9.4(a).
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"Lien" shall mean any mortgage, pledge, assessment, security interest,
lease, sublease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale contract, title retention contract, or other
contract to give or to refrain from giving any of the foregoing.
"Loan Amount" shall have the meaning ascribed to it in Section 2.4.
"Material Adverse Effect" means any event, change, or occurrence that has
or would reasonably be expected to have a material adverse effect on the
business, assets, condition (financial or otherwise) or results of operations of
the Acquired Entities taken as a whole, other than events, changes, or
occurrences that are generally applicable in the behavioral health care industry
of the United States (provided that such events, changes or occurrences do not
adversely affect the Acquired Entities in a materially disproportionate manner).
"Material Contracts" shall have the meaning ascribed to it in Section
3.10.
"Materials of Environmental Concern" means chemicals, pollutants,
contaminants, hazardous materials, hazardous substances and hazardous wastes,
medical waste, toxic substances, petroleum and petroleum products and
by-products, asbestos-containing materials, PCBs, and any other chemicals,
pollutants, substances or wastes, in each case so defined, identified, or
regulated under any Environmental Law.
"Medical Waste" includes, but is not limited to, (a) pathological waste,
(b) blood, (c) sharps, (d) wastes from surgery or autopsy, (e) dialysis waste,
including contaminated disposable equipment and supplies, (f) cultures and
stocks of infectious agents and associated biological agents, (g) contaminated
animals, (h) isolation wastes, (i) contaminated equipment, (j) laboratory waste
and (k) various other biological waste and discarded materials contaminated with
or exposed to blood, excretion, or secretions from human beings or animals.
"Medical Waste" also includes any substance, pollutant, material, or contaminant
listed or regulated under the Medical Waste Tracking Act of 1988, 42 U.S.C.
"6992, et seq. ("MWTA"), and applicable state Law.
"Medical Waste Law" means the following, including regulations promulgated
and orders issued thereunder, all as may be amended from time to time: the MWTA,
the U.S. Public Vessel Medical Waste Anti-Dumping Act of 1988, 33 USCA "2501 et
seq., the Marine Protection, Research, and Sanctuaries Act of 1972, 33 USCA
"1401 et seq., The Occupational Safety and Health Act, 29 USCA "651 et seq., the
United States Department of Health and Human Services, National Institute for
Occupations Self-Safety and Health Infectious Waste Disposal Guidelines,
Publication No. 88-119, and any other federal, state, regional, county,
municipal, or other local Laws insofar as they purport to regulate Medical
Waste, or impose requirements relating to Medical Waste.
"Multiemployer Plan" shall mean any "multiemployer plan" within the
meaning of Section 3(37) or Section 4001(a)(3) of ERISA.
"Non-Competition Agreement" shall have the meaning ascribed to it in
Section 5.15.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PCBs" shall have the meaning ascribed to it in Section 3.18(f).
"Permits" shall mean all licenses, permits, franchises, rights,
registrations, approvals, authorizations, consents, waivers, exemptions,
clearances, releases, variances or orders of, or filings with, or otherwise
issued by, any Governmental Authority.
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"Permitted Liens" shall mean (i) Liens for Taxes not yet due and payable
as of the Closing Date, (ii) landlords', carriers, warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising in the ordinary course of
business consistent with past practice, none of which is overdue for a period of
more than 30 days, (iii) pledges or deposits in connection with worker's
compensation, unemployment insurance and other social security legislation, (iv)
any lease obligations under the Contracts, (v) with respect to any leased Real
Property, Liens which encumber the fee interest in such property, (vi) all
matters shown on the title insurance policies or surveys supplied to Purchaser
by Seller pursuant to Section 3.11 hereof and (vii) such minor defects,
irregularities, encumbrances, easements, rights-of-way, restrictions,
encroachments and other similar encumbrances which, individually or in the
aggregate, do not materially interfere with the present use and operation of
such property subject thereto. Notwithstanding the foregoing, any liens arising
from the Credit Agreement shall not be considered Permitted Liens and will be
released at Closing.
"Person" shall mean any natural person, corporation, general partnership,
limited partnership, limited liability company, union, association, court,
Governmental Authority or other entity or authority.
"Pre-Closing Period" shall have the meaning ascribed to it in Section
6.7(a)(i).
"Pre-Closing Period Tax Returns" shall have the meaning ascribed to it in
Section 6.7(a)(i).
"Programs" shall have the meaning ascribed to it in Section 3.25.
"Promissory Note" shall have the meaning ascribed to it in Section 2.4.
"Provider Agreements" shall have the meaning ascribed to it in Section
3.25.
"Provider Numbers" shall have the meaning ascribed to it in Section 3.25.
"Purchaser" shall mean Psychiatric Solutions, Inc., a Delaware
corporation.
"Purchaser Common Stock" shall have the meaning ascribed to it in Section
4.3.
"Purchaser Financial Statements" shall have the meaning ascribed to it in
Section 4.8.
"Purchaser Indemnitee" shall have the meaning ascribed to it in Section
9.1.
"Purchaser Material Breach" shall have the meaning ascribed to it in
Section 10.1(e).
"Purchaser SEC Filings" shall have the meaning ascribed to it in Section
4.8.
"Purchaser Shares" shall mean 1,362,760 unregistered shares of Purchaser
Common Stock.
"Real Property" shall have the meaning ascribed to it in Section 3.11(b).
"Redemption Date" shall mean the 35th day following the Closing Date (or
45th day following the Closing Date in the event the trustee under the Indenture
requires 15 days prior notice pursuant to the terms of the Indenture).
"Redemption Price" means, with respect to an Untendered Note, an amount
equal to the sum of (i) 100% of the principal amount of the Untendered Note,
plus (ii) the Applicable Premium, plus (iii) accrued and unpaid interest
thereon, if any, to the applicable Redemption Date.
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"Registration Rights Agreement" shall have the meaning ascribed to it in
Section 6.9.
"Registration Statement" shall have the meaning ascribed to it in Section
6.9.
"SEC" shall mean the Securities and Exchange Commission of the United
States of America.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Securities Laws" shall mean the Securities Act and the Exchange Act.
"Seller" shall mean Ardent Health Services LLC, a Delaware limited
liability company.
"Seller Cash Payment" shall have the meaning ascribed to it in Section
2.3.
"Seller Indemnitee" shall have the meaning ascribed to it in Section 9.2.
"Seller Material Breach" shall have the meaning ascribed to it in Section
10.1(d).
"Seller Stock Sale" shall have the meaning ascribed to it in the recitals.
"Straddle Period" shall have the meaning ascribed to it in Section
6.7(a)(ii).
"Straddle Period Tax Returns" shall have the meaning ascribed to it in
Section 6.7(a)(ii).
"Tax" or "Taxes" means any and all taxes and other governmental charges of
the same or of a similar nature (including, but not limited to, taxes on or with
respect to net or gross income, franchise, profits, gross receipts, capital,
sales, use, ad valorem, value added, transfer, real property transfer, transfer
gains, inventory, capital stock, license, payroll, employment, social security,
unemployment, severance, occupation, real or personal property, estimated taxes,
rent, excise, occupancy, recordation, bulk transfer, intangibles, alternative
minimum, doing business, withholding and stamp), together with any interest
thereon, penalties (or other governmental charges of the same or of a similar
nature), additions to tax or additional amounts with respect thereto, imposed by
any Governmental Authority or other applicable jurisdiction.
"Tax Indemnification Agreement" shall have the meaning ascribed to it in
Section 3.14(e).
"Tax Proceeding" shall have the meaning ascribed to it in Section
6.7(c)(ii).
"Tax Return" means any return, declaration, report, statement, information
statement and other document (including any related or supporting information)
filed or required to be filed with respect to Taxes, including any claims for
refunds of Taxes and any amendments or supplements of any of the foregoing.
"Tender Offer" means the (i) cash tender offer at a price not less than
the Tender Offer Price (as defined below) to purchase all of AHS' outstanding
10% Senior Subordinated Notes due 2013 (the "Senior Subordinated Notes") and
(ii) the solicitation of the consent of the holders of the Senior Subordinated
Notes regarding amendments (the "Indenture Amendments") to the Indenture dated
as of August 19, 2003, as amended (the "Indenture"), among AHS, certain
subsidiaries of AHS, as guarantors, Seller, as a guarantor (collectively with
such subsidiaries, the "Guarantors"), and U.S. Bank Trust National Association,
as Trustee.
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"Tender Offer Price" means the cash tender price equal to the outstanding
principal of the Senior Subordinated Notes, plus (i) accrued interest to the
date of purchase pursuant to the Tender Offer and (ii) the Applicable Tender
Offer Premium, less the applicable payment for consents from the holders of the
Senior Subordinated Notes.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two Business Days prior to, in the
case of calculating the Applicable Premium, the date fixed for prepayment or, in
the case of calculating the Applicable Tender Offer Premium, the tenth Business
Day immediately preceding the expiration time of the Tender Offer (or, if such
Statistical Release is no longer published, any publicly available source for
similar market data)) most nearly equal to the then remaining term of the Senior
Subordinated Notes to August 15, 2008; provided, however, that if the then
remaining term of the Senior Subordinated Notes to August 15, 2008 is not equal
to the constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the then remaining term of the Senior Subordinated Notes
to August 15, 2008 is less than one year, the weekly average yield on actually
traded United States Treasury securities adjusted to a constant maturity of one
year shall be used.
"Untendered Notes" shall mean the Senior Subordinated Notes outstanding
after the consummation of the Tender Offer.
"Untendered Note Amount" shall mean $37,714.80.
"WARN Act" shall mean the Workers Adjustment and Retraining Notification
Act, 29 U.S.C. Section 2101-2109.
ARTICLE II
PURCHASE AND SALE; CLOSING
2.1 Sale of the AHS Shares. On and subject to the terms and conditions set
forth in this Agreement, at the Closing, Seller shall sell, assign, transfer and
deliver to Purchaser, free and clear of all Liens, the AHS Shares, and Purchaser
shall purchase from Seller, the AHS Shares. Upon receipt by Seller of the
consideration described in Section 2.3 title to the AHS Shares shall pass to
Purchaser, free and clear of all Liens, other than Liens arising from the acts
of Purchaser and its Affiliates.
2.2 Excluded Assets and Liabilities; Certain Included Liabilities.
Notwithstanding anything, express or implied, to the contrary contained in
Section 2.1 or elsewhere herein, the assets of the Acquired Entities set forth
in Schedule 2.2 that are transferred in the Excluded Subsidiaries Sale
Transaction are to be excluded from the assets of the Acquired Entities being
acquired by or transferred to Purchaser at the Closing through Purchaser's
acquisition of the AHS Shares. With the exception of the above-described assets
(the "Excluded Assets") and the excluded liabilities described on Schedule 2.2
(the "Excluded Liabilities"), the Acquired Entities shall retain all of the
assets and liabilities of the Acquired Entities, including, without limitation,
their respective trade payables, operating liabilities, accrued expenses,
contingent liabilities and other obligations. Prior to the Closing, Seller shall
cause the Excluded Assets to be transferred to AMS or another Person designated
by Seller by means of dividend or otherwise.
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2.3 Purchase Price. The consideration to be paid by Purchaser to Seller
for the AHS Shares shall be (i) an amount in cash equal to $425,934,216.46 (the
"Seller Cash Payment") and (ii) the Purchaser Shares.
2.4 Purchaser Loan. At the Closing, Purchaser shall loan to AHS an
aggregate of $74,028,068.74 (the "Loan Amount") and AHS shall issue to Purchaser
a Promissory Note in the form attached hereto as Exhibit 2.4 (the "Promissory
Note") evidencing such loan.
2.5 Closing. The Closing will take place at the offices of Xxxxxx Xxxxxxx
Xxxxxx & Xxxxx, PLLC, 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxxxxxxx, or
such other place as shall be mutually agreed upon in writing by the parties
hereto, at 10:00 a.m. Central Time, on July 1, 2005. The date on which the
Closing takes place is referred to herein as the "Closing Date." The Closing
shall be deemed to occur at 12:01 a.m., Central Time, on the Closing Date or
such other time as shall be mutually agreed upon in writing by the parties
hereto (the "Effective Time").
2.6 Closing Deliveries. At the Closing, the following events will occur:
(a) AHS Share Stock Certificates. Seller shall deliver to Purchaser
certificates representing the AHS Shares duly endorsed or accompanied by duly
executed blank stock powers, as appropriate.
(b) Promissory Note. AHS shall deliver to Purchaser an executed copy
of the Promissory Note.
(c) Payment for the AHS Shares. Purchaser shall deliver the Seller
Cash Payment in immediately available funds by electronic wire transfer to an
account designated by Seller and shall deliver to Seller certificates
representing the Purchaser Shares.
(d) Loan Amount. Purchaser shall deliver the Loan Amount in
immediately available funds by electronic wire transfer in the amounts and to
the accounts designated by AHS on the Closing Date for purposes of repaying the
Bank Indebtedness and consummating the Tender Offer.
(e) Legal Opinions.
(i) Seller shall cause an original opinion of Boult, Cummings,
Xxxxxxx & Xxxxx, PLC, counsel for Seller, to be delivered to Purchaser as
contemplated by Section 7.5; and
(ii) Purchaser shall cause an original opinion of Xxxxxx
Xxxxxxx Xxxxxx & Xxxxx, PLLC, counsel for Purchaser, to be delivered to Seller
as contemplated by Section 8.5.
(f) Closing Certificates and Documents.
(i) Seller shall deliver the other certificates and documents
required to be delivered by Seller pursuant to Article VII; and
(ii) Purchaser shall deliver the other certificates and
documents required to be delivered by Purchaser pursuant to Article VIII.
2.7 Repayment of Seller Promissory Note. Immediately following the
Closing, Seller shall pay in full the Seller Promissory Note and shall deliver
to Purchaser reasonably satisfactory evidence of such payment and cancellation
of the Seller Promissory Note. Purchaser shall cause
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AHS to use such funds from the repayment of the Seller Promissory Note for
purposes of repaying the Bank Indebtedness and consummating the Tender Offer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as of the date of the Original
Agreement (and with respect to the representations and warranties set forth in
Sections 3.1. 3.4 and 3.5 as of the date hereof) as follows:
3.1 Organization of Seller. Seller is a limited liability company duly
formed, validly existing and in good standing under the Laws of the State of
Delaware. Seller is duly qualified or licensed to transact business and is in
good standing in all jurisdictions in which it conducts business. Seller has the
limited liability company power and full authority and legal capacity to execute
and deliver this Agreement and all other documents or agreements to be executed
and delivered by it and to consummate the transactions contemplated hereby or
thereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
limited liability company action on the part of Seller.
3.2 Organization and Capitalization of AHS.
(a) AHS (i) is a corporation duly organized, validly existing and in
good standing under the Laws of the State of Delaware, (ii) has the corporate
power and authority to own or lease and to operate its assets and to conduct its
business as currently conducted, and (iii) is duly qualified to transact
business as a foreign corporation and is in good standing in each of the
jurisdictions listed in Schedule 3.2(a) and is not required to be so qualified
by the requirement of any Laws in any other jurisdiction except where the
failure to be so qualified would not, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(b) The authorized capital stock of AHS consists of 10,000 shares of
common stock, $.01 par value per share, of which 1,000 shares (the "AHS Shares")
are issued and outstanding. The AHS Shares have been duly authorized and validly
issued and are fully paid and non-assessable.
(c) Except as set forth in Schedule 3.2(c), (i) Seller has good and
marketable title to, and owns, the AHS Shares, beneficially and of record, (ii)
the AHS Shares are free and clear of all Liens of any nature whatsoever, (iii)
Seller has full voting power over the AHS Shares, subject to no proxy,
shareholders' agreement, voting trust or other agreement relating to the voting
of any of the AHS Shares, and (iv) other than this Agreement, there is no
agreement between Seller or any of its subsidiaries and any other Person with
respect to the disposition of the AHS Shares or otherwise relating to the AHS
Shares.
(d) Except as set forth in Schedule 3.2(d), (i) no Person has any
preemptive right to purchase any stock or other securities of AHS, (ii) there
are no outstanding securities or other instruments of AHS that are convertible
into or exchangeable for any shares of its capital stock, (iii) other than the
AHS Shares, there are no outstanding securities or other instruments of AHS
giving the owner or holder thereof the right to vote on any matters on which
AHS' stockholders may vote, (iv) there are no contracts, arrangements,
commitments or restrictions relating to the issuance, sale, transfer, purchase
or obtaining of capital stock or other securities or instruments of AHS, and (v)
there is no existing option, warrant, right, call or commitment of any character
granted or issued by AHS governing the issuance of shares of its capital stock.
3.3 Organization and Capitalization of the AHS Subsidiaries.
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(a) Schedule 3.3(a)(i) contains a true, complete and correct list of
all subsidiaries, direct or indirect, of AHS (the "AHS Subsidiaries"), other
than the subsidiaries, direct or indirect, of AHS listed on Schedule 3.3(a)(ii)
(the "Excluded Subsidiaries"). Except for the AHS Subsidiaries and the Excluded
Subsidiaries, AHS does not directly or indirectly own, of record or
beneficially, any outstanding equity interests in any other Person.
(b) Each AHS Subsidiary (i) is a corporation, limited liability
company or general partnership, as the case may be, duly organized or formed,
validly existing and in good standing under the laws of the state of its
organization or formation, as identified on Schedule 3.3(b), (ii) has the
corporate, limited liability company or general partnership power and authority
to own or lease and to operate its assets and to conduct its business as
currently conducted, and (iii) is duly qualified to transact business as a
foreign corporation, limited liability company or general partnership and is in
good standing in each of the jurisdictions listed in Schedule 3.3(b) and is not
required to be so qualified by the requirement of any Laws in any other
jurisdiction except where the failure to be so qualified would not, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(c) Schedule 3.3(c) sets forth the authorized equity securities of
each AHS Subsidiary and indicates the number of issued and outstanding equity
securities of such AHS Subsidiary. Except as set forth in Schedule 3.3(c), the
equity securities of each AHS Subsidiary have been duly authorized and validly
issued and are fully paid and non-assessable.
(d) Except as set forth in Schedule 3.3(d), (i) AHS has good and
marketable title to, and owns, directly or indirectly, all of the outstanding
shares of capital stock or other outstanding equity securities of each AHS
Subsidiary (the "AHS Subsidiary Shares"), beneficially and of record; (ii) the
AHS Subsidiary Shares are free and clear of all Liens of any nature whatsoever,
(iii) AHS has full voting power over the AHS Subsidiary Shares, subject to no
proxy, shareholders' agreement, voting trust or other agreement relating to the
voting of any of the AHS Subsidiary Shares, and (iv) other than this Agreement,
there is no agreement between Seller or any of its subsidiaries and any other
Person with respect to the disposition of the AHS Subsidiary Shares or otherwise
relating to the AHS Subsidiary Shares.
(e) (i) No Person has any preemptive right to purchase any stock,
equity interests or other securities of any AHS Subsidiary, (ii) there are no
outstanding securities or other instruments of any AHS Subsidiary that are
convertible into or exchangeable for any shares of its capital stock or any
other equity securities, (iii) other than the AHS Subsidiary Shares, there are
no outstanding securities or other instruments of any of the AHS Subsidiaries
giving the owner or holder thereof the right to vote on any matters on which AHS
Subsidiary shareholders may vote, (iv) there are no contracts, arrangements,
commitments or restrictions relating to the issuance, sale, transfer, purchase
or obtaining of capital stock or other securities or instruments of any AHS
Subsidiary, and (v) there is no existing option, warrant, right, call or
commitment of any character granted or issued by any AHS Subsidiary governing
the issuance of shares of its capital stock.
3.4 Authorization.
(a) The execution, delivery and performance by Seller of this
Agreement and the other agreements to be entered into by it pursuant to the
terms of this Agreement, and the consummation by Seller of the transactions
contemplated hereby and thereby are within Seller's limited liability company
powers, are not in contravention of the terms of Seller's Constituent Documents,
and have been duly authorized and approved by the managers of Seller. No other
corporate, limited liability company or partnership, as the case may be,
proceedings on the part of Seller or any Acquired Entity are necessary to
authorize the execution, delivery and performance by
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Seller or any Acquired Entity of this Agreement or the other agreements to be
entered into by Seller or any Acquired Entity pursuant to the terms of this
Agreement.
(b) This Agreement has been duly and validly executed and delivered
by Seller, and, as of the Closing, the other agreements to be entered into by
Seller or any Acquired Entity pursuant to the terms of this Agreement will have
been duly and validly executed and delivered by Seller or such Acquired Entity,
as the case may be. This Agreement constitutes, and upon their execution and
delivery, such other agreements will constitute, the legal, valid and binding
obligations of Seller and any Acquired Entity party thereto, enforceable against
Seller and any Acquired Entity party thereto in accordance with their respective
terms (assuming the valid authorization, execution and delivery hereof and
thereof by Purchaser and any other unaffiliated entity that is a party thereto).
3.5 No Conflicting Agreements; Consents. Except as set forth in Schedule
3.5, neither the execution and delivery of this Agreement or any of the other
agreements to be entered into by Seller or any Acquired Entity pursuant to the
terms of this Agreement nor the consummation of any of the transactions
contemplated hereby or thereby will:
(a) violate, conflict with, result in a breach or termination of the
terms, conditions or provisions of, constitute a default under, or entitle any
party to terminate or accelerate (i) the respective Constituent Documents of
Seller or any of the Acquired Entities, (ii) any Contract, except such
violations, conflicts, breaches, defaults, terminations or accelerations which,
either individually or in the aggregate, (A) would not materially impair the
ability of Seller and the Acquired Entities to perform their respective
obligations hereunder or under the other agreements contemplated hereby to be
entered into by any of them or would not prevent the consummation of the
transactions contemplated hereby or thereby, or (B) would not reasonably be
expected to have a Material Adverse Effect, (iii) any Court Order to which
Seller or any of the Acquired Entities is a party or by which Seller or any of
the Acquired Entities is bound, or (iv) any requirements of Law affecting Seller
or any of the Acquired Entities, except such violations, conflicts, breaches or
defaults of such requirements of Law which, either individually or in the
aggregate, (A) would not materially impair the ability of Seller and the
Acquired Entities to perform their respective obligations hereunder or under the
other agreements contemplated hereby to be entered into by any of them or would
not prevent the consummation of the transactions contemplated hereby or thereby
or (B) would not reasonably be expected to have a Material Adverse Effect;
(b) result in the creation or imposition of any Lien upon any of the
assets of any Acquired Entity (except for Permitted Liens); or
(c) require a permit from, the approval, consent or authorization
of, or the making by Seller or any of the Acquired Entities of any declaration,
filing or registration with, any Governmental Authority, except as provided in
Section 5.1 or Section 6.2 and except for such approvals, consents,
authorizations, declarations, filings or registrations, the failure of which to
be obtained or made (i) would not, individually or in the aggregate, materially
impair the ability of Seller to perform its respective obligations hereunder or
under the other agreements contemplated hereby to be entered into by it or
prevent the consummation of the transactions contemplated hereby or thereby or
(ii) would not reasonably be expected to have a Material Adverse Effect.
3.6 Financial Statements.
(a) Schedule 3.6 contains copies of the unaudited combined balance
sheet of the Company at December 31, 2004 and the unaudited combined statement
of income of the Company for the year ended December 31, 2004 (collectively, the
"Company Financial Statements"). The Company Financial Statements have been
prepared from and in accordance with the Books and Records of the Company,
fairly present in all material respects the financial position and results of
13
operations of the Company as of the date and for the periods indicated, and have
been prepared in accordance with GAAP (subject to normal year-end audit
adjustments) applied on a consistent basis throughout the period involved,
except as may be indicated on Schedule 3.6.
(b) The Company maintains internal accounting controls that provide
reasonable assurance that (i) transactions are executed in accordance with
management's authorization, (ii) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain accountability
for its assets, (iii) access to its assets is permitted only in accordance with
management's authorization and (iv) the reported accountability for its assets
is compared with existing assets at reasonable intervals.
3.7 Absence of Undisclosed Liabilities. Except as disclosed in Schedule
3.7, the Company does not have any material liabilities or obligations required
by GAAP to be reflected on a consolidated balance sheet (whether accrued,
absolute, asserted or unasserted, contingent or otherwise) except for (a)
liabilities reflected or reserved against in the Company Financial Statements,
(b) liabilities incurred in the ordinary course of the Company's business since
the Balance Sheet Date, (c) Excluded Liabilities or (d) liabilities incurred in
connection with the transactions contemplated by this Agreement.
3.8 Absence of Certain Changes. Except as disclosed in Schedule 3.8 or as
contemplated by the Excluded Subsidiaries Sale Transaction or elsewhere in this
Agreement, since the Balance Sheet Date, the Acquired Entities have conducted
their businesses only in the ordinary course of such businesses and:
(a) AHS has not (i) declared, set aside or paid any dividend or made
or agreed to make any other distribution or payment in respect of its capital
stock or redeemed, purchased or otherwise acquired or agreed to redeem, purchase
or otherwise acquire any shares of its capital stock or (ii) amended its
Constituent Documents;
(b) no Acquired Entity has incurred any liabilities that under GAAP
would be required to be reflected on a balance sheet for the Company (other than
liabilities incurred in the ordinary course of its business consistent with past
practice) in an aggregate amount in excess of $100,000;
(c) no Acquired Entity has sold, assigned or transferred any of its
assets or properties except dispositions or sales of inventory in the ordinary
course of business;
(d) no Acquired Entity has mortgaged, pledged or subjected to any
Lien, any of the assets or properties of such Acquired Entity other than (i)
Permitted Liens, (ii) Liens incurred in the ordinary course of business
consistent with past practice on assets and properties having a fair value not
exceeding $100,000 in the aggregate and (iii) Liens under the Credit Agreement;
(e) no Acquired Entity has suffered any damage, destruction or loss,
whether or not covered by insurance, that has had or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect;
(f) except as contemplated by Schedule 3.12(h), no Acquired Entity
has entered into any employment, severance or termination agreement with any of
the employees of an Acquired Entity, other than employment contracts with
physicians entered into in the ordinary course of business;
(g) neither Seller nor AHS has made any material change in its
accounting principles, practices or methodologies;
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(h) no Acquired Entity has (A) made any increase in the rate of
compensation payable to any of its employees, other than normal and customary
increases consistent with past practice or increases that otherwise were
required by such Acquired Entity's obligations pursuant to applicable Law or
Contracts in effect on the Balance Sheet Date, or (B) increased severance or
termination obligations to any of its employees (except (i) increases that are
the result of increases to an employee's underlying compensation that either (A)
are not required to be disclosed pursuant to this Section 3.8(h) or (B) are
disclosed in Schedule 3.8, and (ii) increases described in or contemplated by
Schedule 3.12(h) hereto); and
(i) neither Seller nor any Acquired Entity has entered into any
agreement or arrangement, or made any other commitment (whether oral or
written), to do any of the foregoing.
3.9 Legal Proceedings, etc. There are no actions, suits or proceedings
pending, or to the Knowledge of Seller, threatened against Seller or any of its
subsidiaries (including AHS and any of the other Acquired Entities) which,
either individually or in the aggregate, if decided adversely, would reasonably
be expected to (a) materially impair the ability of Seller or any Acquired
Entity to perform their respective obligations hereunder or under the other
agreements contemplated hereby to be entered into by any of them or (b) prevent
the consummation of the transactions contemplated hereby or thereby. Except as
set forth in Schedule 3.9, there are no actions, suits or proceedings pending,
or to the Knowledge of Seller, threatened against any Acquired Entity which,
either individually or in the aggregate, if decided adversely, would reasonably
be expected to result in a Material Adverse Effect. Except as otherwise
disclosed in Schedule 3.9, neither Seller, AHS nor any other Acquired Entity has
received written notice from any Governmental Authority that any Acquired Entity
is the target of any investigation or proceeding by any Governmental Authority,
nor to the Knowledge of Seller is any such investigation or proceeding pending.
3.10 Contracts; No Defaults. Seller has made or will make available to
Purchaser copies of the Material Contracts. Schedule 3.10 sets forth a complete
and accurate list of the following Contracts: (i) all Contracts that have an
aggregate annual value or result in an aggregate annual expense of at least
$250,000; (ii) any agreement that grants a right of first refusal with respect
to the purchase or sale of a capital asset of an Acquired Entity or an equity
interest in an Acquired Entity; (iii) any agreement relating to the borrowing or
lending of money other than advances to employees to cover business expenses in
the ordinary course of business; (iv) any joint venture contract, partnership
contract or similar contract evidencing an ownership interest or a participation
in or sharing of profits; (v) any guaranty, contribution agreement or other
agreement that includes any material indemnification or contribution obligation;
(vi) any agreement (including any non-competition agreement) limiting the
ability of any Acquired Entity to engage in any line of business or in business
with any Person or restricting the geographical area in which such Acquired
Entity may engage in any business; and (vii) any employment, consulting,
management, severance or indemnification contract or agreement with annual
obligations in excess of $100,000. Seller has provided or will provide Purchaser
true and correct copies of all agreements with any individual known by any
Acquired Entity to be a physician or an immediate family member of a physician,
or with an entity known by any Acquired Entity to be owned by a physician or an
immediate family member of a physician (together with the contracts referenced
in (i)-(vii) above, the "Material Contracts"). All of the Material Contracts are
with respect to the Acquired Entities, and, to Seller's Knowledge, with respect
to all other parties thereto, valid and binding obligations, are in full force
and effect in accordance with their terms. Except as set forth in Schedule 3.10,
there is not, under any of the Material Contracts, any existing default, event
of default or other event which, with or without due notice or lapse of time or
both, would constitute a default or event of default on the part of any Acquired
Entity, except such defaults, events of default and other events as to which
requisite waivers or consents have been obtained or would not reasonably be
expected to cause a Material Adverse Effect. To Seller's knowledge, no party to
any of the Material Contracts intends to cancel, terminate or exercise any
option under any of such Material Contracts.
15
3.11 Title to Property.
(a) Each of the Acquired Entities is in possession of and has good
title to, or has valid leasehold interests in or valid rights under contract to
use, all of the personal property used in or reasonably necessary for the
conduct of its business; such personal properties include all personal
properties reflected on the Company Financial Statements and all of the personal
properties purchased or otherwise acquired by the Acquired Entities since the
Balance Sheet Date, other than (i) current assets or properties disposed of
since the Balance Sheet Date in the ordinary course of business consistent with
past practice, and (ii) the Excluded Assets. None of such personal properties
are subject to any Liens (other than Permitted Liens and Liens under the Credit
Agreement).
(b) Each of the Acquired Entities has good and valid title to all
owned real property represented as being owned thereby, or a valid and binding
leasehold interest in all real property represented as being leased thereby,
used in connection with the operation of the business of such Acquired Entity,
together with (to the extent, with respect to the leased real property, provided
in the lease for such leased real property) all buildings, improvements and
fixtures located thereupon and all improvements and fixtures located thereupon
and all construction in progress (such real property is referred to herein as
the "Real Property"), subject to no Liens other than Permitted Liens and Liens
under the Credit Agreement. The address for the Real Property that each Acquired
Entity owns in fee simple is listed in Schedule 3.11(b).
(c) Schedule 3.11(c) lists all leases to which an Acquired Entity is
a party involving rental of real property as a lessor, lessee, sublessor or
sublessee (the "Leases"). Seller has delivered to Purchaser true and correct
copies of all Leases. All of the Leases are valid and binding obligations of the
Acquired Entities, are in full force and effect, and are enforceable against the
Acquired Entities in accordance with their terms; and to the Knowledge of
Seller, no event has occurred (whether with or without notice, lapse of time or
both) would constitute a default by the applicable Acquired Entity thereunder.
To the Knowledge of Seller, none of the other parties to any of the Leases (i)
is in default under any such Lease or (ii) considers an Acquired Entity to be in
material default thereunder.
(d) Seller has provided or will provide Purchaser true and correct
copies of rent rolls for each building in which an Acquired Entity leases or
subleases space to tenants, which rent rolls identify the space leased, and with
respect to each lease or sublease, identify (i) the tenant or subtenant, (ii)
the number of square feet leased, (iii) the term commencement date and
expiration date, (iv) any term renewal options, (v) the annual or monthly rent,
and (vi) amount of security deposit.
(e) Seller has provided or will provide a true and correct list of
the most current owner's title policies issued to Seller or an Acquired Entity
with respect to any of the Real Property or any portion thereof, and copies
thereof have been supplied to Purchaser.
(f) Seller has provided or will provide Purchaser a true and correct
list of the most current "as-built" surveys or boundary surveys obtained by
Seller or an Acquired Entity with respect to any of the Real Property or any
portion thereof, and copies thereof have been supplied to Purchaser.
(g) Seller has provided or will provide Purchaser a true and correct
copy of all environmental site assessments obtained by Seller or an Acquired
Entity with respect to any of the Real Property or any portion thereof, and
copies thereof have been supplied to Purchaser.
16
(h) During the past three (3) years, no Acquired Entity has received
from any Governmental Authority any written notice of any violation of any
building codes, zoning regulations, or other Law in respect of the Real Property
or its use by such Acquired Entity, except for such violations as would not
reasonably be expected to have a Material Adverse Effect. To the Knowledge of
Seller, no portion of the Real Property is subject to a condemnation or similar
proceeding. Schedule 3.11(h) describes all construction work, if any, which any
Acquired Entity has contracted for that would require any capital expenditure
exceeding $100,000 and which is presently in progress in respect of the business
of such Acquired Entity and also contains a good faith estimate, as of the date
of the Original Agreement, of the cost to complete each such project and the
amounts paid by Seller or the Acquired Entities to date.
3.12 Employees; Labor Matters; Employee Benefit Plans; ERISA.
(a) Except as set forth on Schedule 3.12(a), (i) no Acquired Entity
is a party to, or bound by, any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization, (ii)
there is no unfair labor practice or labor arbitration proceeding pending, or to
the Knowledge of Seller, threatened against an Acquired Entity relating to its
business, except for any such proceeding which has not had, or would not
reasonably be expected to have, a Material Adverse Effect, (iii) to the
Knowledge of Seller, there are no organization efforts with respect to the
formation of a collective bargaining unit presently being made or threatened
involving employees of any Acquired Entity, (iv) there is no labor strike,
material slowdown or material work stoppage or lockout actually pending or, to
the Knowledge of Seller, threatened against or affecting any Acquired Entity,
and an Acquired Entity has not experienced any strike, material slowdown or
material work stoppage or lockout since January 1, 2002, (v) no Acquired Entity
is delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed for
it or amounts required to be reimbursed to such employees, (vi) each Acquired
Entity is in compliance with all applicable laws respecting labor, employment,
fair employment practices, terms and conditions of employment, workers'
compensation, occupational safety, plant closings, and wages and hours, except
where noncompliance, either individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect, (vii) each Acquired
Entity has withheld all amounts required by Law or by agreement to be withheld
from the wages, salaries, and other payments to employees, and (viii) each
Acquired Entity is not liable for any arrears of wages or any Taxes or any
penalty for failure to comply with any of the foregoing.
(b) Schedule 3.12(b) contains a list of each Company Plan that is
intended to be qualified within the meaning of Code Section 401(a) and each
other Company Plan.
(c) With respect to each Company Plan, Seller has delivered to
Purchaser a current, accurate and complete copy (or, to the extent no such copy
exists, an accurate description) of each such Company Plan and each of the
following, to the extent applicable to each such Company Plan: (i) any related
trust agreement or other funding instrument; (ii) the most recent IRS favorable
determination letter, if the Company Plan is a Code Section 401(a) plan for
which such a letter has been issued; (iii) any summary plan description, summary
of material modifications, employee handbooks and other material written
communications provided over the past three (3) years to participants in each
Company Plan; and (iv) for the three (3) most recent plan years for each such
Company Plan, any Form 5500 filed for each Company Plan and all attached
schedules, including audited financial statements, actuarial valuation reports
(if any), and the responses of any attorneys for the Company Plan to any request
for information underlying any such audited financial statements.
(d) Except as disclosed in Schedule 3.12(d), (i) each Company Plan
has been established, drafted and administered in all material respects in
accordance with its terms and the
17
applicable provisions of ERISA, the Code and other applicable Laws; (ii) each
Company Plan that is intended to be qualified within the meaning of Code Section
401(a) has been the subject of an IRS favorable determination letter as to its
qualification or the sponsor of the Company Plan may rely on the IRS
notification letter to the sponsor of any prototype plan used to document the
terms of such Company Plan as to the tax-qualified status of such Company Plan;
(iii) to the Knowledge of Seller, nothing has occurred, whether by action or
failure to act, that could reasonably be expected to adversely affect the
tax-qualified status of any Company Plan that is intended to be qualified within
the meaning of Code Section 401(a); (iv) no event has occurred and no condition
exists that would subject any Acquired Entity, either directly or by reason of
its affiliation with any Controlled Group Member, to any material Tax, fine,
Lien, penalty or other liability imposed by ERISA, the Code or other applicable
Laws with respect to each Company Plan that is intended to be qualified within
the meaning of Code Section 401(a); (v) there have been no reportable events
within the meaning of ERISA Section 4043, accumulated funding deficiencies
within the meaning of ERISA Section 302 or Code Section 412 (whether or not
waived), or PBGC liens imposed with respect to any Company Plan; (vi) for each
Company Plan with respect to which a Form 5500 has been filed, to the Knowledge
of Seller, no material change has occurred with respect to the matters covered
by the most recent Form 5500 since the date of filing thereof; (vii) neither
Seller, any of the Acquired Entities, nor, to the Knowledge of Seller, any other
party in interest or a disqualified person (as defined in Code Section
4975(e)(2)) has engaged in a "prohibited transaction" (within the meaning of
ERISA Section 406 and Code Section 4975) with respect to any Company Plan for
which there is no exemption under ERISA Section 408 or Code Section 4975; (viii)
except as required by Title I, Part 6 of ERISA, no Company Plan provides
post-employment or retiree welfare benefits and no Acquired Entity has any
obligations to provide any post-employment or retiree welfare benefits; (ix)
contributions required to be made under the terms of any of the Company Plans as
of the date of the Original Agreement have been timely made or have been
properly reflected on the Company's most recent consolidated balance sheet prior
to the date of the Original Agreement; (x) with respect to the Company Plans, no
event has occurred and, to the Knowledge of Seller, there exists no condition or
set of circumstances in connection with which an Acquired Entity would
reasonably be expected to be subject to any material liability (other than for
routine benefit liabilities) under the terms of, or with respect to, such
Company Plans, ERISA, the Code or any other applicable Law; (xi) in all material
respects, all tax, annual reporting and other governmental filings required by
ERISA and the Code for the Company Plans have been timely filed with the
appropriate governmental agency and all notices and disclosures have been timely
provided to participants of the Company Plans; (xii) with respect to the Company
Plans, to the Knowledge of Seller, no excise tax could be imposed upon the
Acquired Entities under Chapter 43 of the Code; and (xiii) the Acquired Entities
do not maintain, sponsor, contribute to or have any liability with respect to
any employee benefit plan, program or arrangement that provides benefits to
non-resident aliens with no U.S. source income outside of the United States.
(e) None of the Company Plans and no other plan or arrangement
sponsored by, contributed to or maintained by Seller, any Acquired Entity or any
Controlled Group Member at any time during the past six (6) years, as of the
Closing Date or in the past, has been subject to Title IV of ERISA.
(f) Except as disclosed on Schedule 3.12(f), there is no
Multiemployer Plan under which any employee or any former employee of any
Acquired Entity has any present or future right to benefits or under which any
Acquired Entity has any present or future liability for services rendered by
such employee to any Acquired Entity prior to the Closing Date. The Acquired
Entities and their Controlled Group Members have not sponsored or contributed to
or been required to contribute to a Multiemployer Plan.
(g) With respect to any Company Plan, no actions, suits or claims
(other than routine claims for benefits in the ordinary course) are pending or,
to the Knowledge of Seller,
18
threatened. Additionally, with respect to any Company Plan, to the Knowledge of
Seller, no facts or circumstances exist that reasonably could give rise to any
such actions, suits or claims that would reasonably be expected to have a
Material Adverse Effect. To the Knowledge of Seller, no Company Plan is
currently subject to an audit or other investigation by the IRS, the Department
of Labor, the PBGC or any other governmental authority.
(h) Except as disclosed in Schedule 3.12(h), no Company Plan or
other agreement exists that could result in the payment to any present or former
employee or director of any Acquired Entity of any money or other property or
accelerate or provide any other rights or benefits to any present or former
employee of any Acquired Entity as a result of the transactions contemplated by
this Agreement, whether or not such payment would constitute a parachute payment
within the meaning of Code Section 280G.
(i) The Acquired Entities and their Controlled Group Members have
complied with the continuation coverage provisions of Title I, Part 6, of ERISA
("COBRA") with respect to all current and former employees and their
beneficiaries. Seller has provided to Purchaser a list of all current and former
employees of the Company and their beneficiaries who are eligible for and/or
have elected continuation coverage under COBRA. Prior to the Closing, Seller
shall deliver to Purchaser a revised version of such list, updated through the
Closing Date.
(j) The Acquired Entities and their Controlled Group Members and the
Company Plans have properly classified individuals providing services to the
Acquired Entities and their Controlled Group Members as independent contractors
or employees, as the case may be.
3.13 Bank Accounts. Schedule 3.13 is a list of the names and locations of
all financial institutions at which any Acquired Entity maintains a checking
account, deposit account, securities account, safety deposit box or other
deposit or safekeeping arrangement, the name of the Acquired Entity that
maintains each such account or arrangement and the number or other means of
identification of each such account and arrangement.
3.14 Taxes.
(a) Except as set forth on Schedule 3.14 or as would not be
reasonably expected to have a Material Adverse Effect, (i) the Acquired Entities
have duly and timely filed all Tax Returns that they were required to file; (ii)
all Tax Returns filed by the Acquired Entities were correct and complete in all
respects; (iii) the Acquired Entities have timely paid all Taxes that have
become due and payable (whether or not shown on a Tax Return) and have
adequately reserved in the Company Financial Statements in accordance with GAAP
for all Taxes (whether or not shown on any Tax Return) that have accrued but are
not yet due or payable as of the dates thereof; and (iv) none of the Acquired
Entities has entered into any "reportable transaction" as defined in Treasury
Regulation Section 1.6011-4(b).
(b) Except as set forth on Schedule 3.14 or as would not be
reasonably expected to have a Material Adverse Effect, (i) the Acquired Entities
have no present liability for Taxes, other than Taxes reflected on the Company
Financial Statements or incurred in the ordinary course of business since the
Balance Sheet Date in amounts consistent with prior years adjusted to reflect
changes in operating results of the Acquired Entities; and (ii) Seller has no
Knowledge of any basis for the assertion by a Governmental Authority of a Tax
deficiency against AHS or any of the AHS Subsidiaries.
(c) Except as set forth on Schedule 3.14 or as would not be
reasonably expected to have a Material Adverse Effect, (i) there is no dispute
or claim concerning any Tax liability of the Acquired Entities either (A)
claimed or raised by any Governmental Authority in writing or (B) as to
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which Seller has Knowledge based upon personal contact with any agent of such
Governmental Authority; (ii) Schedule 3.14 lists all Tax Returns filed with
respect to the Acquired Entities that have been audited by a Governmental
Authority, and indicates those Tax Returns that currently are the subject of
audit by a Governmental Authority; (iii) no jurisdiction in which any of the
Acquired Entities do not file a Tax Return has made a claim in writing that any
of the Acquired Entities is required to file a Tax Return for such jurisdiction,
and Seller has no Knowledge that any such jurisdiction has otherwise made any
such claim; and (iv) neither AHS nor any of the AHS Subsidiaries is a party to
or bound by any closing or other agreement with any Governmental Authority with
respect to Taxes.
(d) Except as would not be reasonably expected to have a Material
Adverse Effect, the Acquired Entities have complied in all respects with all
applicable Laws relating to the withholding and payment over of Taxes
(including, but not limited to, withholding in connection with payments to
employees, independent contractors, creditors, stockholders, partners or other
third parties) and have, within the time and manner prescribed by Law, withheld
and paid over to the proper Governmental Authorities all amounts required to be
withheld and paid over under all applicable Laws.
(e) Except as set forth on Schedule 3.14 or as would not be
reasonably expected to have a Material Adverse Effect, (i) neither AHS nor any
of the AHS Subsidiaries has been a member of any affiliated group filing a
consolidated federal income Tax Return or a member of a combined, consolidated
or unitary group for state, local or foreign Tax purposes (other than a group
the common parent of which has at all times been AHS) or has any liability for
the Taxes of any other Person (other than an entity that is a member of the
consolidated group of corporations that has at all times had AHS as its common
parent until the Excluded Subsidiaries Sale Transaction) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local, or
foreign Law), as a transferee or successor, by contract, or otherwise; and (ii)
neither AHS nor any of the AHS Subsidiaries is a party to, is bound by, or has
any obligation under, any Tax sharing agreement, Tax indemnification agreement
or similar contract or arrangement, whether written or, to the Knowledge of
Seller, unwritten (a "Tax Indemnification Agreement"), and AHS and the AHS
Subsidiaries do not have any potential liability or obligation to any Person as
a result of, or pursuant to, any such Tax Indemnification Agreement.
(f) Except as set forth on Schedule 3.14 or as would not be
reasonably expected to have a Material Adverse Effect, (i) Seller has no
Knowledge of any circumstances that would require either AHS or any of the AHS
Subsidiaries to include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion thereof) ending on or
after the Closing Date as a result of any adjustment pursuant to Section 481(a)
of the Code by reason of a change in accounting method, and Seller has no
Knowledge that the IRS has proposed any such adjustment or a change in any
accounting method used by AHS or any of the AHS Subsidiaries; and (ii), neither
AHS nor any of the AHS Subsidiaries has taken any action inconsistent with its
practices in prior years that would have the effect of deferring a liability for
Taxes from a period prior to the Effective Time to a period following the
Effective Time.
(g) Except as set forth on Schedule 3.14 or as would not be
reasonably expected to have a Material Adverse Effect, (i) none of the Acquired
Entities is subject to any waiver or extension of the statute of limitations
applicable to the assessment or collection of any Tax; and (ii) no power of
attorney or similar grant of authority is in place with respect to the Tax
matters of the Acquired Entities.
(h) Except as would not be reasonably expected to have a Material
Adverse Effect, none of the Acquired Entities is a party to any agreement,
contract, arrangement or plan that has resulted or would result, separately or
in the aggregate, in connection with this Agreement or
20
any change of control of the Acquired Entities, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code.
(i) None of the Acquired Entities is or has been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
(j) Except as set forth on Schedule 3.14 or as would not be
reasonably expected to have a Material Adverse Effect, there are no Liens for
Taxes on any assets of the Acquired Entities, other than Liens for Taxes not yet
due and payable.
(k) Neither AHS nor any of the AHS Subsidiaries has distributed
stock of another Person, or has had its stock distributed by another Person, in
a transaction purported or intended to be governed in whole or in part by
Section 355 or 361 of the Code.
(l) Except as set forth on Schedule 3.14 or as would not be
reasonably expected to have a Material Adverse Effect, (i) neither AHS nor any
of the AHS Subsidiaries is a party to any joint venture, partnership or other
arrangement or contract that could be treated as a partnership for federal
income tax purposes; and (ii) no business entity in which AHS or any of the AHS
Subsidiaries owns an equity interest has made any election pursuant to Treasury
Regulation Section 301.7701-3.
3.15 Insurance. Schedule 3.15 includes a list of all material insurance
policies maintained by or for the benefit of any Acquired Entity, including fire
and extended coverage and casualty, liability and other forms of insurance.
Seller shall keep such insurance or comparable insurance in full force and
effect until the Effective Time. To Seller's Knowledge, none of the Acquired
Entities has received notice from any insurance carrier that any insurance
policy will be canceled or that coverage thereunder will be reduced or
eliminated.
3.16 Intellectual Property. Except as set forth in Schedule 3.16, each
Acquired Entity owns or has the right to use (and following the Closing will
continue to own or have the right to use) all patents, trademarks, trade names,
service marks, trade secrets, copyrights and other intellectual property rights
and licenses as are necessary to conduct its business as currently conducted
(the "Intellectual Property"), free of all Liens except Permitted Liens and
Liens under the Credit Agreement. Except as set forth in Schedule 3.16, (a) to
the Knowledge of Seller, no infringement exists by any of the Acquired Entities
on the intellectual property rights of any other Person that results in any way
from the operations of the businesses of the Acquired Entities, except such
infringements which, either individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect, and (b) there has been
no notice for a Claim against any of the Acquired Entities that its operations,
activities or business infringe any intellectual property of any other Person.
Except as set forth in Schedule 3.16, (i) no Court Orders or proceedings are
pending, or to the Knowledge of Seller, threatened, against any of the Acquired
Entities that challenge the validity of, or such Acquired Entity's ownership of
or right to use, any of the Intellectual Property, and (ii) to the Knowledge of
Seller, there is no infringing use of any of the Intellectual Property owned by
any Acquired Entity by any other Person.
3.17 Compliance with Laws. The Acquired Entities hold all material Permits
applicable to their respective businesses required by applicable Law (the
"Company Permits"). The Acquired Entities are in compliance with the terms of
the Company Permits, except for such failures to comply which, either
individually or in the aggregate, would not have a Material Adverse Effect.
Except as set forth in Schedule 3.17, the Acquired Entities are in compliance
with all Laws of any Governmental Authority, except where the failure to comply,
either individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect. Except as set forth in Schedule
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3.17, to the Knowledge of Seller, there is no threatened suspension,
cancellation or termination of any Company Permits.
3.18 Environmental Matters. Except for such matters as would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect:
(a) The operations of each of the Acquired Entities have been in
compliance with the Environmental Laws, which compliance includes but is not
limited to the possession by each of the Acquired Entities of all permits and
governmental authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof.
(b) Each of the Acquired Entities has not treated, stored, managed,
disposed of, transported, handled, released, or used any Materials of
Environmental Concern except in the ordinary course of its business, and in
compliance with all Environmental Laws.
(c) There are no Environmental Claims pending or, to the Knowledge
of Seller or any of the Acquired Entities, threatened against any of the
Acquired Entities.
(d) There are no off-site locations where any of the Acquired
Entities has stored, disposed or arranged for the disposal of Materials of
Environmental Concern except as permitted by applicable law, and none of the
Acquired Entities has been notified in writing that it is a potentially
responsible party at any such location under any Environmental Laws.
(e) None of the Acquired Entities has assumed or undertaken any
corrective, investigatory or remedial obligation of any other Person relating to
any Environmental Law.
(f) Except as set forth in Schedule 3.18, (i) there are no
underground storage tanks located on property owned, leased or operated by any
of the Acquired Entities; (ii) to Seller's Knowledge, there is no
asbestos-containing material (as defined under Environmental Laws) contained in
or forming part of any building, building component, structure or office space
owned, leased or operated by any of the Acquired Entities; and (iii) to Seller's
Knowledge, there are no polychlorinated biphenyls ("PCBs") or PCB-containing
items contained in or forming part of any building, building component,
structure or office space owned, leased or operated by any of the Acquired
Entities, except as permitted by applicable Law.
3.19 Books and Records. The Books and Records of the Acquired Entities are
complete and correct in all material respects and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls. The records contained in the minute books
of the Acquired Entities are accurate in all material respects.
3.20 No Material Adverse Change. Since the Balance Sheet Date, there has
not been any change in the business, assets, condition (financial or otherwise)
or results of operations of the Acquired Entities that would reasonably be
expected to result in a Material Adverse Effect.
3.21 Brokers. Except for Banc of America Securities LLC, neither Seller
nor any of its subsidiaries (including any of the Acquired Entities) has paid or
become obligated to pay any fee or commission to any broker, finder or
intermediary for or on account of the transactions contemplated by this
Agreement.
3.22 HIPAA Matters.
(a) Each entity (other than an Excluded Subsidiary) owned or
controlled by an Acquired Entity that is a health plan, healthcare clearinghouse
or healthcare provider that
22
transmits any health information in electronic form in connection with a
Transaction (as defined in the Federal Transaction Regulations), as such terms
are defined in the Federal Privacy Regulations (collectively, the "Covered
Entities") is in compliance in all material respects with and has not violated
in any material respect the administrative simplification section of the Health
Insurance Portability and Accountability Act of 1996, as codified at 42 U.S.C.
Sections 1320d through d-8 (collectively, "HIPAA"), the regulations contained in
45 C.F.R. Parts 160 and 164, Subparts A and E, as amended (collectively, the
"Federal Privacy Regulations"), the regulations contained in 45 C.F.R. Parts 160
and 162, as amended (collectively, the "Federal Transaction Regulations") or
applicable state privacy laws.
(b) A complete and accurate list of all Covered Entities and each
Organized Health Care Arrangement (as defined in the Federal Privacy
Regulations) in which a Covered Entity participates is attached hereto as
Schedule 3.22(b)(A). Complete and accurate copies of each Covered Entity's
policies relating to the privacy of its patients Protected Health Information
(as defined in the Federal Privacy Regulations) are attached hereto as Schedule
3.22(b)(B). Each such policy relating to the privacy of patients Protected
Health Information complies with the Federal Privacy Regulations and applicable
state privacy laws, except where noncompliance, either individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
An accurate copy of each Covered Entity's privacy notice and any policy relating
thereto, or the most recent draft thereof, has been furnished to Purchaser.
(c) Complete and accurate copies of all agreements (collectively,
"Business Associate Agreements") between a Covered Entity and a Business
Associate (as defined in the Federal Privacy Regulations), together with a
complete and accurate summary of the terms and conditions of any oral
arrangements with Business Associates, have been furnished to Purchaser. Neither
Seller nor any Covered Entity is aware of any breach by a Business Associate of
any Business Associate Agreement or any violation by a Business Associate of
HIPAA, the Federal Transaction Regulations, or the Federal Privacy Regulations,
except such breaches or violations which, either individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
(d) To Seller's Knowledge, no patient has filed a HIPAA related
complaint with Seller, any of the Acquired Entities or any Governmental
Authority.
3.23 Medical Waste. Except as disclosed on Schedule 3.23, the operations
of the Acquired Entities have been in compliance with the Medical Waste Laws,
except where failure to be in compliance would not reasonably be expected to
have a Material Adverse Effect.
3.24 Certificates of Need. Except as set forth on Schedule 3.24 hereto, no
application for any Certificate of Need, Exemption Certificate (each as defined
below) or declaratory ruling has been made by any Acquired Entity with the
appropriate state agency or other applicable agency that is currently pending or
open before such agency, and no such application (collectively, the
"Applications") filed by any Acquired Entity within the past three (3) years has
been ultimately denied by any Governmental Authority or withdrawn by any
Acquired Entity. Except as set forth on Schedule 3.24 hereto, no Acquired Entity
has had any Applications pending or any approved Applications that relate to
projects not yet completed. Each Acquired Entity has properly filed all required
Applications which are complete and correct in all material respects with
respect to any and all material improvements, projects, changes in services,
zoning requirements, construction and equipment purchases, and other changes for
which approval is required under any applicable federal or state Law. As used
herein "Certificate of Need" means a written statement issued by the appropriate
state agency evidencing community need for a new, converted, expanded or
otherwise significantly modified health care facility, health service or
hospice, and "Exemption Certificate"
23
means a written statement from the appropriate state agency stating that a
health care project is not subject to the Certificate of Need requirements under
applicable state Law.
3.25 Medicare Participation; Accreditation. Except as set forth on
Schedule 3.25, each facility of the Acquired Entities is certified for
participation and reimbursement in the Medicare, Medicaid and TRICARE programs
(the "Programs") and each Acquired Entity has a provider agreement with each
such Program (the "Provider Agreements"). Except as does not have a Material
Adverse Effect, each facility of the Acquired Entities is in compliance with the
conditions of participation of the Programs and with the terms, conditions and
provisions of the Provider Agreements. The Provider Agreements are each in full
force and effect, and Seller has no Knowledge of any fact or circumstance that
would cause any such Provider Agreement not to remain in force or be renewed on
and after Closing. Attached hereto as Schedule 3.25 is a complete list of all
Medicaid and Medicare provider numbers (the "Provider Numbers") in the name of
an Acquired Entity or a facility owned by an Acquired Entity or as otherwise
specified, which an Acquired Entity is currently using in its operations and
excluding any Medicaid and Medicare provider numbers for facilities that were
sold or closed by an Acquired Entity prior to the date of the Original
Agreement. Each facility of the Acquired Entities is duly accredited, with all
Type I recommendations removed, by the Joint Commission on Accreditation of
Healthcare Organizations ("JCAHO"). Copies of the two most recent accreditation
survey reports from JCAHO pertaining to each facility of the Acquired Entities
have been or will be made available to Purchaser. Except as set forth in
Schedule 3.25, since the date of its most recent JCAHO survey, none of the
Acquired Entities has made any changes in policy or operations that it believes
would cause any affected facility to lose such accreditation or to be denied
participation in the Programs. Except as set forth on Schedule 3.25, to Seller's
Knowledge, there is no proceeding, investigation or survey pending or
threatened, involving any of the Programs or any other third party payor
programs, with respect to the Acquired Entities and Seller has no reason to
believe that any such investigations or surveys are pending, threatened, or
imminent.
3.26 Compliance Program. The Acquired Entities have provided to Purchaser
a copy of their current compliance program materials. Except as set forth on
Schedule 3.26, neither Seller nor any Acquired Entity (a) is a party to a
Corporate Integrity Agreement with the Office of Inspector General of the
Department of Health and Human Services, (b) has reporting obligations pursuant
to any settlement agreement entered into with any Governmental Authority, (c) to
Seller's Knowledge, has been the subject of any government payor program
investigation conducted by any Governmental Authority, (d) to Seller's
Knowledge, has been a defendant in any qui tam/False Claims Act or similar
litigation and (e) has been served with or received any search warrant,
subpoena, civil investigative demand, contact letter, or, to Seller's Knowledge,
telephone or personal contact by or from any federal or state enforcement
agency, except in connection with medical services provided to third parties who
may be defendants or the subject of investigation into conduct unrelated to the
operation of the facilities of the Acquired Entities or any other health care
businesses conducted by an Acquired Entity, or except where the receipt of such
would not reasonably be expected to have a Material Adverse Effect. For purposes
of this Agreement, the term "compliance program" refers to provider programs of
the type described in the Compliance Program Guidance published by the Office of
Inspector General of the Department of Health and Human Services.
3.27 Regulatory Compliance. Except to the extent permitted by applicable
Law, no Acquired Entity, nor to Seller's Knowledge, any director, officer or
employee of an Acquired Entity, nor any agent acting on behalf of or for the
benefit of any of the foregoing, has directly or indirectly: (i) offered, paid
or received any remuneration, in cash or in kind, to, or made any financial
arrangements, with any past, present or potential customers, past or present
suppliers, patients, medical staff members, contractors or third party payors of
an Acquired Entity in exchange for business or payments from such Persons; (ii)
given or agreed to give, received or agreed to receive, or is aware that there
has been made or that there is any agreement to make, any gift or gratuitous
24
payment of any kind, nature or description (whether in money, property or
services) to any customer or potential customer, supplier or potential supplier,
contractor, third party payor or any other Person in exchange for business or
payments; (iii) made or agreed to make, or is aware that there has been made or
that there is any agreement to make, any contribution, payment or gift of funds
or property to, or for the private use of, any governmental official, employee
or agent where either the contribution, payment or gift or the purpose of such
contribution, payment or gift is or was illegal under any Law of the United
States or under the Laws of any Governmental Authority having jurisdiction over
such payment, contribution or gift; (iv) established or maintained any
unrecorded fund or asset for any improper purpose or made any misleading, false,
or artificial entries on any of its books or records for any reason; (v) made,
or agreed to make, or is aware that there has been made or that there is any
agreement to make, any improper payment to any Person; (vi) made any payment for
or agreed to make any payment for any goods, services, or property in excess of
fair market value; or (vii) committed a violation of any Law, specifically
including, but not limited to, Medicare and Medicaid fraud and abuse provisions
of the Social Security Act, including any activity which is prohibited under (A)
the Federal Anti-kickback Statute, 42 U.S.C. Section 1320a-7b et seq.; (B) the
physician self-referred provisions of the Xxxxx Law (42 U.S.C. Section 1395nn)
or the regulations thereunder; (C) the False Claims Act (31 U.S.C. Section
3729); (D) the Civil Monetary Penalties Law (42 U.S.C. Sections 1320a-7a); (E)
Mail and Wire Fraud (18 U.S.C. Sections 1341-1343); (F) False Statements
Relating to Health Care Matters (18 U.S.C. Section 1035); and (G) Health Care
Fraud (18 U.S.C. Section 1347) or regulations related to any of the above (or
related state and local fraud and abuse statutes or regulations), except for
such activities as would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
3.28 Medical Staff Matters. Seller has provided or will provide to
Purchaser true, correct, and complete copies of the bylaws and rules and
regulations of the medical staff of each facility of the Acquired Entities. With
regard to the medical staff of each facility of the Acquired Entities and except
as set forth on Schedule 3.28 hereto, there are no pending or, to Seller's
Knowledge, threatened disputes with applicants, staff members or health
professional affiliates and all appeal periods in respect of any medical staff
member or applicant against whom an adverse action has been taken have expired.
The Acquired Entities have delivered to Purchaser a written disclosure
containing a brief general description of all adverse actions taken in the six
(6) months prior to the date of the Original Agreement against medical staff
members or applicants which could result in claims or actions against an
Acquired Entity. Except as set forth on Schedule 3.28, (i) no employee or
independent contractor of an Acquired Entity (whether an individual or entity),
or any member of an Acquired Entity's medical staff has been excluded from
participating in any federal health care program (as defined in 42 U.S.C.
Section 1320a-7b(f)) during the last five (5) years, nor to Seller's Knowledge
is any such exclusion threatened or pending and (ii) none of the officers,
directors, agents or managing employees (as such term is defined in 42 U.S.C.
Section 1320a-5(b)) of an Acquired Entity, has been excluded from Medicare or
any federal health care program (as defined in 42 U.S.C. Section 1320a-7b(f)) or
been subject to sanction pursuant to 42 U.S.C. Section 1320a-7a or 1320a-8 or
been convicted of a crime described at 42 U.S.C. Section 1320a-7b, nor to
Seller's Knowledge is any such exclusion, sanction or conviction threatened or
pending. No Acquired Entity has been excluded from participating in any federal
health care program (as defined in 42 U.S.C. Section 1320a-7b(f)), nor to
Seller's Knowledge is any such exclusion threatened or pending. No Acquired
Entity has been convicted of a criminal offense related to the provision of
health care services.
3.29 Third Party Payor Cost Reports. Each Acquired Entity duly filed in a
timely manner all required cost reports for all the fiscal years through and
including the fiscal year ended December 31, 2003. The required cost reports for
the fiscal year ended December 31, 2004 will be filed on or before their due
date, including any extensions thereof. Except as set forth on Schedule 3.29,
all of the cost reports filed by each Acquired Entity accurately reflect in the
information required to be included thereon and do not claim, and no Acquired
Entity has received, reimbursement in any amount in excess of the amounts
allowed by applicable Law or any applicable agreement, except
25
where the receipt of such reimbursement would not reasonably be expected to
result in a Material Adverse Effect. Schedule 3.29 attached hereto accurately
indicates which cost reports have not been audited and finally settled and a
brief description of any and all notices of program reimbursement, proposed or
pending audit adjustments, disallowances, and any and all other unresolved
claims or disputes in respect of the cost reports. Except as set forth on
Schedule 3.29 and to the Knowledge of Seller, there are no facts or
circumstances which give rise to any disallowance under any such cost reports
which would reasonably be expected to result in a Material Adverse Effect.
3.30 Reimbursement. Except as set forth on Schedule 3.30, all billing
practices of each Acquired Entity with respect to all third party payors,
including the Programs and private insurance companies, have been in compliance
with all applicable laws, regulations and policies of such third party payors,
private insurance companies, and the Programs, except as would not reasonably be
expected to have a Material Adverse Effect. To Seller's Knowledge, all claims,
returns, invoices and other forms made by the Acquired Entities to Medicare,
Medicaid or any other third party payor are true, complete, correct and accurate
in all material respects. No deficiency in any such claims, returns or other
filings, including claims for overpayments, setoff or recoupments, or
deficiencies for late filings, has been asserted or, to the Knowledge of Seller,
threatened by any Governmental Authority or any other third party payor, other
than medical or claim reviews arising in the ordinary course of business, and,
to the Knowledge of Seller, there is no basis for any such claims or
deficiencies. Except as set forth in Schedule 3.30, to Seller's Knowledge, no
Acquired Entity within the prior five (5) years has been subject to any audit,
investigation, monitoring or other form of review by any Governmental Authority
based upon an alleged improper activity. No Acquired Entity has billed or
received any payment or reimbursement in excess of amounts allowed by Law,
except where the receipt of such reimbursement would not reasonably be expected
to result in a Material Adverse Effect. There is no proceeding, investigation
(except for medical reviews or claim reviews in the ordinary course of
business), pending or, to the Knowledge of Seller, threatened against Seller or
the Acquired Entities, involving any of the Programs, or any other third party
payor programs. Except as set forth in Schedule 3.30, the Acquired Entities are
not currently under focused medical review or the subject of any probe audits by
the Centers for Medicare and Medicaid Services or its contractors and, to the
Knowledge of Seller, no such actions have been threatened.
3.31 Statutory Funds. None of the assets of the Acquired Entities are
subject to any liability to which Purchaser may become obligated in respect of
amounts received by the Acquired Entities for the purchase or improvements of
the assets or any part thereof under restricted or conditioned grants or
donations, including monies received under the Public Health Laws.
3.32 Investment Representations.
(a) Seller is acquiring the Purchaser Shares for its own account.
(b) Seller has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of
purchasing the Purchaser Shares and to understand the risks of, and other
considerations relating to, its purchase of the Purchaser Shares.
(c) Seller is aware that as of the Closing Date, the Purchaser
Shares will not have been registered under the Securities Act or any state's
securities laws. Seller further understands that the certificates representing
the Purchaser Shares will include an appropriate legend to the effect that such
securities have not been registered under the Securities Act or any state's
securities laws and that such securities may not be sold or transferred except
in compliance with the Securities Act and applicable state securities laws.
3.33 Controlled Substances. To Seller's Knowledge, none of the employees,
or persons who provide professional services under agreements with Seller, has
engaged in any activities which
26
are prohibited under the federal Controlled Substances Act, 21 U.S.C. Section
801 et seq. or the regulations promulgated pursuant to such statute or any
related state or local statutes or regulations concerning the dispensing and
sale of controlled substances.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as of the date of the Original
Agreement (and with respect to the representations and warranties set forth in
Sections 4.1. 4.2 and 4.4 as of the date hereof) as follows:
4.1 Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware. Purchaser
is duly qualified or licensed to transact business and is in good standing in
all jurisdictions in which it conducts business. Purchaser has the corporate
power and full authority and legal capacity to execute and deliver this
Agreement and all other documents or agreements to be executed and delivered by
it and to consummate the transactions contemplated hereby or thereby.
4.2 Corporate Authorization.
(a) The execution, delivery and performance by Purchaser of this
Agreement and the other agreements to be entered into by Purchaser pursuant to
this Agreement, and the consummation by Purchaser of the transactions
contemplated hereby and thereby are within Purchaser's corporate powers, are not
in contravention of the terms of Purchaser's Constituent Documents, and have
been duly authorized and approved by the board of directors of Purchaser. No
other corporate proceedings on the part of Purchaser are necessary to authorize
Purchaser's execution, delivery and performance of this Agreement or the other
agreements to be entered into by Purchaser pursuant to this Agreement.
(b) This Agreement has been duly and validly executed and delivered
by Purchaser, and as of the Closing, the other agreements to be entered into by
Purchaser pursuant to the terms of this Agreement will have been duly and
validly executed and delivered by Purchaser. This Agreement constitutes, and
upon their execution and delivery, such other agreements will constitute, the
legal, valid and binding obligations of Purchaser, enforceable against Purchaser
in accordance with their respective terms (assuming the valid authorization,
execution and delivery hereof and thereof by Seller, and any other unaffiliated
entity that is a party thereto).
4.3 Capitalization. The authorized capital stock of Purchaser consists of
48,000,000 shares of common stock, $.01 par value per share, of which 20,496,730
shares are issued and outstanding (the "Purchaser Common Stock") and 6,000,000
shares of preferred stock, $.01 par value per share, of which no shares are
issued and outstanding. The issued and outstanding shares of Purchaser Common
Stock are, and the Purchaser Shares when issued in accordance with this
Agreement shall be, duly authorized, validly issued, fully paid and
non-assessable and issued in compliance with all applicable federal and state
securities Laws.
4.4 No Conflicting Agreements; Consents. Neither the execution and
delivery of this Agreement or any of the other agreements to be entered into by
Purchaser pursuant to this Agreement nor the consummation of any of the
transactions contemplated hereby or thereby will:
(a) violate, conflict with, result in a breach of the terms,
conditions or provisions of, or constitute a default under (i) the Constituent
Documents of Purchaser or any subsidiary thereof, (ii) any Contract
(substituting the term "Purchaser or one its subsidiaries" for the phrase
"Acquired
27
Entities" in the definition thereof), except such violations, conflicts,
breaches or defaults which, either individually or in the aggregate, would not
materially impair the ability of Purchaser to perform its obligations hereunder
or under the other agreements contemplated hereby to be entered into by
Purchaser or would not prevent the consummation of the transactions contemplated
hereby or thereby, (iii) any Court Order to which Purchaser or one of its
subsidiaries is a party or by which Purchaser is bound, or (iv) any requirements
of Law affecting Purchaser or one of its subsidiaries, except such violations,
conflicts, breaches or defaults of such requirements of Laws which, either
individually or in the aggregate, would not materially impair the ability of
Purchaser to perform its obligations hereunder or under the other agreements
contemplated hereby to be entered into by Purchaser or which would not prevent
the consummation of the transactions contemplated hereby or thereby; or
(b) require a permit from, the approval, consent or authorization
of, or the making by Purchaser or one its subsidiaries of any declaration,
filing or registration with, any Governmental Authority, except as provided in
Section 5.1 or Section 6.2 and except for such approvals, consents,
authorizations, declarations, filings or registrations, the failure of which to
be obtained or made would not, either individually or in the aggregate,
materially impair the ability of Purchaser to perform its obligations hereunder
or under the other agreements contemplated hereby to be entered into by
Purchaser or prevent the consummation of the transactions contemplated hereby or
thereby.
4.5 Legal Proceedings, etc. There are no actions, suits or proceedings
pending or, to the Knowledge of Purchaser, threatened against Purchaser or any
of its subsidiaries which, either individually or in the aggregate, would
materially impair the ability of Purchaser to perform its obligations hereunder
or under the other agreements contemplated hereby to be entered into by
Purchaser or could reasonably be expected to prevent the consummation of the
transactions contemplated hereby or thereby.
4.6 Brokers. Except for Citigroup Global Markets Inc., Purchaser has not
paid or become obligated to pay any fee or commission to any broker, finder or
intermediary for or on account of the transactions contemplated by this
Agreement.
4.7 Investment Representations.
(a) Purchaser is acquiring the AHS Shares for its own account and
not with a view to the distribution thereof within the meaning of the Securities
Act.
(b) Purchaser has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of
purchasing the AHS Shares and to understand the risks of, and other
considerations relating to, its purchase of the AHS Shares.
(c) Purchaser is aware that as of the Closing Date, the AHS Shares
will not have been registered under the Securities Act or any state's securities
laws. Purchaser further understands that the certificates representing the AHS
Shares will include an appropriate legend to the effect that such securities
have not been registered under the Securities Act or any state's securities laws
and that such securities may not be sold or transferred except in compliance
with the Securities Act and applicable state securities laws.
4.8 SEC Filings; Financial Statements.
(a) Purchaser has timely filed all SEC documents required to be
filed by Purchaser since December 31, 2002 (together with all such SEC documents
filed, whether or not required to be filed, the "Purchaser SEC Filings"). The
Purchaser SEC Filings (i) at the time filed, complied in all material respects
with the applicable requirements of the Securities Laws and other applicable
Laws and (ii) did not, at the time they were filed (or, if amended or superseded
by a filing
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prior to the date of this Agreement, then on the date of such filing or, in the
case of registration statements, at the effective date thereof) contain any
untrue statement of a material fact or omit to state a material fact required to
be stated in such Purchaser SEC Filings or necessary in order to make the
statements in such Purchaser SEC Filings, in light of the circumstances under
which they were made, not misleading.
(b) Each of the Purchaser financial statements (including, in each
case, any related notes) contained in the Purchaser SEC Filings, including any
Purchaser SEC Filings filed after the date of the Original Agreement until the
Effective Time (the "Purchaser Financial Statements") complied in all material
respects with the applicable published rules and regulations of the SEC with
respect thereto, was prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements or, in the case of unaudited interim statements, as
permitted by Form 10-Q of the SEC), and fairly presented in all material
respects the consolidated financial position of Purchaser and the Purchaser
subsidiaries as at the respective dates and the consolidated results of
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments.
(c) Purchaser maintains internal accounting controls that provide
reasonable assurance that (i) transactions are executed in accordance with
management's authorization, (ii) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain accountability
for its assets, (iii) access to its assets is permitted only in accordance with
management's authorization and (iv) the reported accountability for its assets
is compared with existing assets at reasonable intervals.
4.9 Financing. Purchaser has delivered to Seller a true and correct copy
of the commitment letter executed by Lender and all other material agreements
with the Lender (with all fees redacted) with respect to financing the
transactions contemplated by this Agreement (together, the "Commitment Letter").
The Commitment Letter is in full force and effect and sets forth all of the
material agreements with the Lender with respect to the financing of the
transactions contemplated by this Agreement. Purchaser has the ability to obtain
funds in cash in amounts equal to the sum of the Seller Cash Payment and the
Loan Amount by means of the Commitment Letter or otherwise and will at the
Closing have immediately available funds in cash, which are sufficient to pay
the Seller Cash Payment and to consummate the transactions contemplated hereby.
4.10 No Material Adverse Change. Since the Balance Sheet Date, there has
not been any change in the business, assets, condition (financial or otherwise)
or results of operations of Purchaser that would reasonably be expected to have
a Material Adverse Effect (substituting the term "Purchaser and its
subsidiaries" for the phrase "Acquired Entities" in the definition thereof).
ARTICLE V
COVENANTS OF SELLER
5.1 Regulatory Approvals. Seller will, and will cause the Acquired
Entities, to (a) use commercially reasonable efforts to obtain, as promptly as
practicable, each of the Permits that are or should be listed in Schedule 5.1
hereto (other than those that have been obtained prior to the date hereof), and
to make the filings and declarations with Governmental Authorities that are
listed in Schedule 5.1 hereto as promptly as practicable after the date hereof
(other than those that have been made prior to the date hereof), (b) provide
such information and communications to applicable Governmental Authorities that
are necessary in connection with the foregoing or in connection with Purchaser's
obtaining any Permits or making any filings or declarations with Governmental
Authorities in accordance with Section 6.2 as such Governmental Authorities or
Purchaser may
29
reasonably request, and (c) cooperate with Purchaser in obtaining or making, as
soon as practicable, any Permits that Purchaser is required to obtain pursuant
to Section 6.2.
5.2 Conduct Prior to the Closing. On or after the date hereof and prior to
the Closing, except (w) as disclosed in Schedule 5.2 hereto, (x) for the
Excluded Subsidiaries Sale Transaction, the Tender Offer and the Bank
Refinancing, (y) as consented to or approved in writing by an authorized officer
of Purchaser, such consent not to be unreasonably withheld or (z) as
contemplated by Section 2.2 or Section 5.10:
(a) Seller shall not act or omit to act, and shall cause the
Acquired Entities not to act or omit to act, otherwise than in accordance with
the following:
(i) None of the Acquired Entities shall amend its Constituent
Documents;
(ii) No change shall be made in the number of shares of
authorized or issued capital stock (or other authorized capital) of any of the
Acquired Entities; nor shall any option, warrant, call, right, commitment or
agreement of any character be granted or made by any of the Acquired Entities
relating to the capital stock or other securities of such Acquired Entity; nor
shall any of the Acquired Entities issue, grant or sell any securities or
obligations convertible into or exchangeable for shares of its capital stock,
nor shall Seller enter into or permit any of the Acquired Entities to enter into
any other agreement with respect to any capital stock of such Acquired Entity or
any security convertible into or relating to any capital stock of any of the
Acquired Entities;
(iii) AHS shall not declare or pay dividends or make any other
distributions in respect of its capital stock;
(iv) Seller shall not make or change any election, change an
annual accounting period, adopt or change any accounting method, file any
amended Tax Return, enter into any closing agreement, settle any Tax claim or
assessment relating to the Acquired Entities, surrender any right to claim a
refund of Taxes, consent to any extension or waiver of the limitation period
applicable to any Tax claim or assessment relating to the Acquired Entities, or
take any other similar action relating to the filing of any Tax Return or the
payment of any Tax, if such election, adoption, change, amendment, agreement,
settlement, surrender, consent or other action would have the effect of
materially increasing the Tax liability of the Acquired Entities for any period
ending after the Closing Date or decreasing any Tax attribute of the Acquired
Entities existing on the Closing Date; provided, however, that notwithstanding
this clause (iv), the Acquired Entities shall be permitted prior to Closing to
(x) file amended income tax returns for their 2002 and 2003 taxable years in
order to deduct certain transaction costs not previously deducted for such
years, (y) file for a quick refund of overpayments of estimated taxes made by
the Acquired Entities with respect to their 2004 taxable year and (z) carry back
net operating losses incurred by the Acquired Entities in their 2004 taxable
year to obtain a refund of taxes paid by the Acquired Entities with respect to
their 2002 taxable year (provided, that Seller shall submit a draft of any such
amended Tax Returns to Purchaser for its review and comment at least twenty (20)
days prior to the due date of such amended Tax Returns); and
(v) Except for borrowing arrangements incurred pursuant to
physician agreements entered into in the ordinary course of business, the
Acquired Entities will not (A) incur any indebtedness for borrowed money, other
than intercompany indebtedness that will be forgiven at the Closing in
accordance with Section 5.11 hereof; (B) assume, guaranty, endorse or otherwise
become liable or responsible for the obligations of any Person other than
another Acquired Entity; (C) make any loans, advances or capital contributions
to, or investments in, any other Person; or (D) make any commitments to do any
of the foregoing.
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(b) Seller shall use commercially reasonable efforts not to act or
omit to act, and shall cause the Acquired Entities to use commercially
reasonable efforts not to act or omit to act, otherwise than in accordance with
the following:
(i) The business operations, activities and practices of the
Acquired Entities shall be conducted consistent with the ordinary course of
business and in conformity with past practice, including keeping the insurance
policies covering the Acquired Entities in full force and effect;
(ii) The respective business organizations of the Acquired
Entities shall be preserved intact, and the services of the present employees,
agents and representatives of the Acquired Entities shall be kept available for
Purchaser (except with respect to those employees or relationships terminated
for cause); and
(iii) The relationships with, and the goodwill of, the
customers and employees of the Acquired Entities and others having business
relations with the Acquired Entities shall be preserved.
5.3 Employee Matters. Pending the Closing, except as otherwise consented
to or approved in writing by an authorized officer of Purchaser or as otherwise
provided in Schedule 5.3 hereto, Seller shall cause the Acquired Entities not to
(a) make any increase in the rate of compensation payable to any of the
employees of the Acquired Entities or the employees of AHS Management Company,
Inc. listed on Schedule 6.5 other than in the ordinary course of business
consistent with past practice, (b) increase severance or termination obligations
to any of such employees (other than as a result of compensation increases as
provided above and in compliance with applicable Law), (c) enter into any
employment, consulting, severance or termination agreement with any such
employees (other than physicians in the ordinary course of business), or (d)
except as provided in this Section 5.3, amend or terminate any Company Plan,
with respect to the benefits provided to such employees, or adopt or enter into
any new plan or agreement that would be a Company Plan if it existed on the date
of the Original Agreement. Notwithstanding clause (d) of the preceding sentence,
Seller reserves the right to amend each of the Company Plans and transfer the
plan sponsorship and administrative duties of the Company Plans to one of
Seller's Affiliates which is not one of the Acquired Entities and, to the extent
necessary, to make any other amendment that may be required to comply with ERISA
or the Code.
5.4 Access by Purchaser. Subject to the terms of the Confidentiality
Agreement, between the date of this Agreement and the Closing Date, to the
extent permitted by Law, Seller will provide Purchaser and its counsel,
accountants and other representatives with reasonable access during normal
business hours, to all of the assets, properties, facilities, employees, agents,
accountants and Books and Records of any Acquired Entity and will furnish or
make available to Purchaser and such representatives during such period all such
information and data (including, without limitation, copies of the Contracts)
concerning the business, operations or affairs of any Acquired Entity in the
possession of Seller or any Acquired Entity or under its control as Purchaser or
such representatives reasonably may request; provided, however, such
investigation shall be coordinated through persons as may be designated in
writing by Seller for such purpose. Purchaser's right of access and inspection
shall be made in such a manner as not to interfere unreasonably with the
operation of the Acquired Entities. In this regard, Purchaser agrees that such
inspection shall not take place, and no employees or other personnel of the
Acquired Entities shall be contacted by Purchaser's representatives, without
first coordinating such contact or inspection with any of the officers of Seller
or their designee.
5.5 Financial Statements and Reports. As soon as practicable following the
end of each month from and after the date hereof and prior to the Closing Date,
Seller will deliver to Purchaser
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true and complete copies of the unaudited balance sheets and the related
unaudited statements of income of the Company (on a consolidated basis) for each
month then ended, which financial statements shall have been prepared from and
in accordance with the Books and Records of the Company, and which shall fairly
present, in all material respects, the financial position and results of
operations of the Company, as of the date and for the period indicated.
5.6 Closing Conditions. Seller will use its commercially reasonable
efforts to cause each of the conditions set forth in Article VII to be satisfied
as soon as reasonably practicable.
5.7 Transfer of Assets. From and after the date hereof and until the
Closing, Seller shall cause the Acquired Entities not to sell or dispose of any
of their assets or properties without the prior written consent of Purchaser,
except for (a) dispositions contemplated by the Excluded Subsidiaries Sale
Transaction, or (b) dispositions or sales of inventory or obsolete equipment in
the ordinary course of business.
5.8 Encumbrances. From and after the date hereof and until the Closing,
Seller shall not cause or permit the Acquired Entities to enter into or assume
any mortgage, pledge, conditional sale or other title retention agreement or
permit any Lien to attach upon any of the assets of any Acquired Entity, whether
now owned or hereafter acquired, except for Permitted Liens and Liens under the
Credit Agreement (which Liens shall be released at Closing).
5.9 Condition of Assets. From and after the date hereof and until the
Closing, Seller shall use commercially reasonable efforts, and shall cause the
Acquired Entities to use commercially reasonable efforts, to maintain and keep
in good order, subject to ordinary wear and tear, all Real Property, inventory,
machinery, equipment and other tangible personal property owned or leased by the
Acquired Entities and used in connection with the operation of the businesses of
the Acquired Entities.
5.10 Intercompany Accounts. Except as otherwise provided in this
Agreement, including without limitation Section 2.2, and except as otherwise
provided in Schedule 5.10, at or prior to the Closing, (a) all indebtedness and
other amounts (i) owed by Seller, or any of its Affiliates (other than an
Acquired Entity) to an Acquired Entity or (ii) owed by an Acquired Entity to
Seller or any of its Affiliates (other than an Acquired Entity) shall be paid,
canceled or eliminated (whether or not then due), and (b) all Liens relating to
any of the aforesaid indebtedness or amounts shall be canceled and shall be
discharged of record and (c) all arrangements calling for the transfer of funds
by any Acquired Entity in connection with Seller's cash management program shall
be terminated as of the Closing.
5.11 Exclusivity. From the date hereof until the Closing, Seller agrees
that neither Seller nor any Affiliate thereof nor any of their respective
officers, directors or representatives will, (a) negotiate with any Persons
(other than Purchaser and its Affiliates) with respect to a sale, merger,
consolidation, reorganization or other business combination pursuant to which
the stock, assets or business of any Acquired Entity would be combined with that
of, or sold to, any acquirer or any other business or entity (except as
contemplated by Section 2.2); (b) solicit or respond to any Acquisition
Proposals; (c) furnish any information with respect to the business, activities,
operations, assets or liabilities of the Acquired Entities, or other similar
matters, to any Person whatsoever (other than to Lender and the lenders in
connection with the financing contemplated by the Commitment Letter or as
otherwise described in this Agreement) with respect to the foregoing; nor (d)
proceed or continue with negotiations in respect of the foregoing which may be
in progress as of the date of this Agreement.
5.12 Resignations. Seller shall obtain the written resignations of all
directors and officers of the Acquired Entities as are requested by Purchaser
not less than ten (10) days in advance of the Closing, such resignations to be
effective as of the Effective Time. To the extent that any such officer
32
or director is also an employee of an Acquired Entity, such resignation shall be
applicable only to the person's position as an officer or director and not to
such person's employment.
5.13 Company Plans. Notwithstanding anything herein to the contrary,
Seller shall, upon request by Purchaser, at the Closing (i) fully vest the
employees of the Acquired Entities in their accounts in the Company Plans that
are intended to be tax-qualified plans described in Code Section 401(a), and
(ii) as soon as administratively feasible after Closing, transfer the accounts
of the employees of the Acquired Entities in the Company Plans that are intended
to qualify under section 125, 129, and 401(a) of the Code to corresponding plans
maintained by Purchaser or its Affiliates. Prior to the date of any such
transfer, Purchaser agrees to provide copies of any such recipient plans to the
plan administrator of each of the Company Plans involved in any such transfer
and to enter into a plan-to-plan transfer agreement with such plan
administrator, on terms reasonably acceptable to the plan administrator, and to
make reasonable assurances regarding the handling of the transferred funds in
such agreement in order to preserve the qualified status of the transferee plan
involved with such transfer. If Purchaser does not request such a transfer of
the accounts of the employees of the Acquired Entities in the Company Plans
intended to be qualified under Section 401(a), such employees shall have the
right to receive a distribution of their accounts in such Company Plans
following the Closing.
5.14 Non-Competition Agreement. Seller shall execute and deliver to
Purchaser the Non-Competition Agreement in the form attached hereto as Exhibit
5.14 (the "Non-Competition Agreement").
5.15 Notice of Certain Occurrences. Seller will notify Purchaser promptly
in writing of, and contemporaneously will provide Purchaser with true and
complete copies of any and all material information or documents relating to,
any event, transaction or circumstance occurring prior to or after the date
hereof of which Seller has Knowledge that causes or would cause any covenant or
agreement of Seller under this Agreement to be breached, or that renders or
would render untrue any representation or warranty of Seller contained in this
Agreement as if such representation or warranty were made on or as of the date
of such event, transaction or circumstance.
5.16 Amendment of Management Agreements. Seller shall use its best efforts
to cause (i) that certain Management Services Agreement between BHC Management
Services of Louisiana, LLC and AHS Summit Hospital, LLC, dated January 6, 2004,
and (ii) that certain Management Services Agreement between BHC Management
Services of New Mexico, LLC and AHS Albuquerque Regional Medical Center, LLC,
dated February 4, 2003, to be amended to provide that such agreements will not
be terminated without cause by AHS Summit Hospital, LLC or AHS Albuquerque
Regional Medical Center, LLC, respectively; provided, however, that, in the
event Purchaser owns or controls a behavioral health care hospital or behavioral
residential treatment center located within fifty (50) miles of such facilities,
the agreements may be terminated without cause.
5.17 Canyon Ridge Acquisition. In the event Seller consummates its
proposed acquisition of the assets of Canyon Ridge Hospital from Inland Mental
Health Associates, Inc. and the real property used in the operation of such
business, the Seller Cash Payment shall be increased, as directed by Seller
prior to the Closing Date, by the amount of consideration paid by Seller in such
acquisition, net of any assumed long-term debt, plus reasonable costs and fees
associated therewith, as set forth on Schedule 5.17.
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ARTICLE VI
COVENANTS OF PURCHASER; CERTAIN ADDITIONAL
COVENANTS OF THE PARTIES
6.1 Notice of Certain Occurrences. Purchaser will notify Seller promptly
in writing of, and contemporaneously will provide Seller with true and complete
copies of any and all material information or documents relating to, any event,
transaction or circumstance occurring prior to or after the date hereof of which
Purchaser has Knowledge that causes or would cause any covenant or agreement of
Purchaser under this Agreement to be breached, or that renders or would render
untrue any representation or warranty of Purchaser contained in this Agreement
as if such representation or warranty were made on or as of the date of such
event, transaction or circumstance.
6.2 Regulatory Approvals. Purchaser will (a) use commercially reasonable
efforts to obtain, as promptly as practicable, all Permits that are or should be
listed in Schedule 6.2 hereto (other than those that have been obtained prior to
the date hereof) and to make the filings and declarations with Governmental
Authorities that are or should be listed in Schedule 6.2 hereto as promptly as
practicable after the date hereof (other than those that have been made prior to
the date hereof) (b) provide such information and communications to applicable
Governmental Authorities as is necessary in connection with the foregoing or in
connection with Seller's obtaining any of the Permits or making any filings or
declarations with Governmental Authorities in accordance with Section 5.1 as
such Governmental Authorities or Seller may reasonably request, and (c)
cooperate with Seller in obtaining or making, as soon as practicable, any
Permits that Seller is required to obtain or make pursuant to Section 5.1.
6.3 Books and Records. Until six (6) months after the later to occur of
(a) the final adjudication of any dispute or investigation involving Taxes
arising out of the business, operations or affairs of the Acquired Entities
before the Effective Time, (b) the final adjudication of any matter for which
Seller may be required to indemnify or hold harmless Purchaser pursuant to the
terms of this Agreement, or (c) the running of applicable statutes of
limitations, Purchaser will maintain all Books and Records of the Acquired
Entities that relate to the pre-Closing business, operations, assets and
properties of the Acquired Entities, and shall give Seller full and complete
access during regular business hours to all such Books and Records to the
fullest extent reasonably required to enable Seller to satisfy its obligations
hereunder or under applicable Law. While as a general matter Purchaser will
maintain all Books and Records of the Acquired Entities, as an interim matter,
Seller shall maintain such Books and Records to the extent necessary to prepare
any Pre-Closing Period Tax Returns. In addition to the following, Purchaser
shall not, without ninety (90) days prior written notification (a "Destruction
Notice") to Seller, destroy any pre-Closing Books and Records of the Acquired
Entities. Following Seller's receipt of a Destruction Notice, if Seller advises
Purchaser in writing within such ninety (90) day period, Purchaser will promptly
deliver the applicable Books and Records to Seller.
6.4 Closing Conditions. Purchaser will use its commercially reasonable
efforts to cause the conditions set forth in Article VIII hereof to be satisfied
as soon as reasonably practicable, but in all circumstances prior to July 1,
2005.
6.5 Employee Matters.
(a) As of the Effective Time, the employees of the Acquired Entities
shall continue employment with the Acquired Entities and the employees of AHS
Management Company, Inc. listed on Schedule 6.5 shall be offered employment by
Purchaser at the Acquired Entities in substantially similar positions and at a
substantially similar level of wages and/or salary and without having incurred a
termination of employment or separation from service; provided, however,
34
such employees meet the pre-employment screening requirements of Purchaser.
Except as may be specifically required by applicable Law, the Acquired Entities
shall not be obligated to continue any employment relationship with any employee
for any specific period of time.
(b) Purchaser shall provide the employees of the Acquired Entities
and the employees of AHS Management Company, Inc. listed on Schedule 6.5 who
commence employment with the Acquired Entities (each, an "Acquired Entity
Employee") with employee benefits that are comparable in the aggregate to those
provided to similarly situated employees of Purchaser (with similar situations
to be determined in light of each such Acquired Entity Employee's new
post-transaction responsibilities).
(c) With respect to the benefits provided pursuant to this Section
6.5, (i) service accrued by Acquired Entity Employees during employment with an
Acquired Entity, Seller or an Affiliate of Seller (including any predecessor
entity) prior to the Effective Time shall be recognized for all purposes, except
for benefit accruals with respect to defined benefit pension plans, (ii) any and
all pre-existing condition limitations (to the extent such limitations did not
apply to a pre-existing condition under the Company Plan that provided
compensable benefits to such Acquired Entity Employee prior to the Closing Date)
and eligibility waiting periods under any group health plan shall be waived with
respect to such Acquired Entity Employees and their eligible dependents, and
(iii) Acquired Entity Employees shall be given credit for amounts paid under a
Company Plan during the applicable period for purposes of applying deductibles,
co-payments and out-of-pocket maximums as though such amounts had been paid in
accordance with the terms and conditions of the employee welfare plans of
Purchaser or an Affiliate of Purchaser in which any Acquired Entity Employee
becomes entitled to participate.
(d) Seller or an Affiliate of Seller shall retain the Company Plans
and any and all obligations related to the Company Plans, including but not
limited to claims incurred but not paid prior to or as of the Closing Date. As
of the Closing Date, the employees of the Acquired Entities and the employees of
AHS Management Company, Inc. listed on Schedule 6.5 will cease to be eligible to
participate or accrue any additional benefits in any of the Company Plans.
6.6 WARN Act Compliance; COBRA. Without limiting the generality of the
foregoing, Seller shall be solely responsible for any and all liability arising
directly or indirectly under the WARN Act, as a result of the transactions
contemplated by this Agreement that occur prior to the Effective Time. Purchaser
shall be solely responsible for compliance with the WARN Act following the
Effective Time. Seller acknowledges and agrees that Purchaser does not assume or
agree to discharge any liability of Seller under COBRA with respect to any
current or former employees (and their beneficiaries) of the Acquired Entities
or the employees of AHS Management Company, Inc. who are terminated prior to the
Effective Time. Seller shall retain any and all liabilities under Section 4980B
of the Code and Sections 601 through 608 of ERISA with respect to all current
and former employees (and their beneficiaries) of the Acquired Entities or the
employees of AHS Management Company, Inc. who are terminated prior to the
Effective Time. With respect to "qualifying events" (as described in Section
4980B(f)(3) of the Code) occurring after the Effective Time, Purchaser shall be
responsible for the COBRA obligations relating to employees of the AHS
Subsidiaries who continue employment following the Effective Time and the
employees of AHS Management Company, Inc. listed on Schedule 6.5 who commence
employment with Purchaser or the Acquired Entities pursuant to Section 6.5(a).
6.7 Tax Matters.
(a) Preparation and Filing of Tax Returns; Payment of Taxes.
35
(i) Seller shall prepare (or cause to be prepared) all Tax
Returns required to be filed by the Acquired Entities for all taxable periods
that end on or prior to the Closing Date (a "Pre-Closing Period") (such Tax
Returns, the "Pre-Closing Period Tax Returns") (provided that Seller shall
submit a draft of any such Pre-Closing Period Tax Return required to be filed by
the Acquired Entities to Purchaser for its review and comment at least twenty
(20) days prior to the due date of such Pre-Closing Period Tax Return (taking
into account valid extensions)). In the event of any disagreement between Seller
and Purchaser as to the proper reporting of any item on any Pre-Closing Period
Tax Return, Seller and Purchaser (after good faith attempt to resolve such
disagreement) shall submit such disagreement to a mutually-agreed upon public
accounting firm whose determination as to the proper reporting of such item
shall be binding on Seller and Purchaser. Seller and Purchaser shall share
equally the costs of such public accounting firm. Seller shall timely file all
such Pre-Closing Period Tax Returns, provided, however, if any Pre-Closing
Period Tax Return is due after the Closing and Seller is not authorized to file
such Pre-Closing Period Tax Return by Law, Purchaser shall file (or cause to be
filed) such Pre-Closing Period Tax Return as prepared by Seller with the
appropriate Governmental Authorities. Seller shall pay all Taxes due and payable
in respect of all Pre-Closing Periods; provided, however, that if any
Pre-Closing Period Tax Return is due after the Closing and is to be filed (or
caused to be filed) by Purchaser, Seller shall pay (in immediately available
funds) all Taxes due and payable in respect of such Tax Return to Purchaser no
later than five (5) days prior to the due date of such Tax Return.
(ii) Purchaser shall prepare and file (or cause to be prepared
and filed), all Tax Returns required to be filed by the Acquired Entities for
all taxable periods beginning before the Closing Date and ending after the
Closing Date (a "Straddle Period") (such Tax Returns, the "Straddle Period Tax
Returns"). Purchaser shall deliver or cause to be delivered drafts of all
Straddle Period Tax Returns to Seller for its review and comment at least twenty
(20) days prior to the due date of any such Straddle Period Tax Return (taking
into account valid extensions) and notify Seller of Purchaser's calculation of
Seller's share of the Taxes of the Acquired Entities for any such Straddle
Periods. In the event of any disagreement between Seller and Purchaser as to the
proper reporting of any item on any Straddle Period Tax Return or calculation of
Taxes for such Straddle Period Tax Return, Seller and Purchaser (after a good
faith attempt to resolve such disagreement) shall submit such disagreement to a
mutually-agreed upon public accounting firm whose determination as to the proper
reporting of such item and calculation of Taxes shall be binding on Seller and
Purchaser. Seller and Purchaser shall share equally the costs of such public
accounting firm. No later than three (3) days prior to the filing of such
Straddle Period Tax Return, Seller shall pay to Purchaser (in immediately
available funds) the amount of Seller's share of the Tax liability for the
Straddle Period determined as of such time pursuant to this Section 6.7(a).
(iii) In order to apportion appropriately any Taxes relating
to a Straddle Period, the parties hereto shall, to the extent required or
permitted under applicable Law, treat the Closing Date as the last day of the
taxable year or period of the Acquired Entities for all Tax purposes. In any
case where applicable Law does not permit the Acquired Entities to treat the
Closing Date as the last day of the taxable year or period, the portion of any
Taxes that are allocable to the portion of the Straddle Period ending on the
Closing Date shall be: (A) in the case of Taxes that are imposed on a periodic
basis, deemed to be the amount of such Taxes for the entire period multiplied by
a fraction the numerator of which is the number of calendar days in the Straddle
Period ending on (and including) the Closing Date and the denominator of which
is the number of calendar days in the entire relevant Straddle Period; and (B)
in the case of Taxes not described in (A) (such as (x) Taxes that are based upon
or measured by income or receipts or imposed in connection with any sale or
other transfer or assignment of property (real or personal, tangible or
intangible) and (y) payroll and similar Taxes), deemed equal to the amount that
would be payable if the taxable year or period ended on the Closing Date;
provided, however, that Purchaser and Seller agree that any real property Taxes
of any Acquired Entity with respect to any Straddle Period shall be the sole
responsibility of Purchaser.
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(b) Transfer Taxes. Notwithstanding any provision of this Agreement
to the contrary, Seller shall pay all sales, value added, use, privilege,
transfer, documentary, gains, stamp, duties and recording Taxes and fees
(including any penalties, interest or additions) (collectively, the "Transfer
Taxes") imposed upon any party incurred as a result of the Excluded Subsidiaries
Sale Transaction and Seller and Purchaser shall each pay one-half of the
Transfer Taxes imposed upon any party incurred as a result of the sale of the
AHS Shares. Seller and Purchaser agree to jointly prepare and timely file all
necessary Tax Returns and other documentation with respect to any Transfer
Taxes.
(c) Post-Closing Audits and Other Procedures.
(i) If a notice of deficiency, proposed adjustment,
adjustment, assessment, audit, examination or other administrative or court
proceeding, suit, dispute or other claim (a "Tax Proceeding") is delivered or
sent to or commenced or initiated against any of the Acquired Entities by any
Governmental Authority with respect to Taxes for which Purchaser is entitled to
indemnification from Seller, Purchaser shall notify Seller in writing of the Tax
Proceeding, and shall include a copy of the relevant Tax Proceeding notice;
provided, that the failure by Purchaser to notify Seller of any such notice
shall not release Seller from its obligations under this Section 6.7 and Section
6.8, except to the extent that Seller is actually prejudiced by the failure of
Purchaser to notify.
(ii) With respect to Tax Proceedings of or relating to Taxes
of any of the Acquired Entities for any Pre-Closing Period, Seller may, upon
written notice to Purchaser at any time, assume and control the defense of such
Tax Proceeding at its own cost and expense and with its own counsel. If Seller
elects to assume the defense of any such Tax Proceeding, notwithstanding
anything to the contrary contained herein, (A) Seller shall not enter into any
settlement with respect to any such Tax Proceeding without Purchaser's prior
written consent, which consent shall not be unreasonably withheld; (B) Seller
shall keep Purchaser informed of all material developments and events relating
to such Tax Proceeding (including promptly forwarding copies to Purchaser of any
related correspondence sent to any Governmental Authority); (C) Purchaser shall
cooperate fully with Seller and its Affiliates in Seller's defense of such Tax
Proceeding; and (D) at its own cost and expense, Purchaser shall have the right
to participate in the defense of such Tax Proceeding only to the extent that
such participation is not in Seller's reasonable judgment detrimental to
Seller's position in such Tax Proceeding.
(iii) In connection with the contest of any Tax Proceeding
that relates to (A) any Straddle Period, (B) any taxable period beginning on or
after the Closing Date and (C) any Tax Proceeding that Seller has the ability to
control but does not timely elect to control pursuant to Section 6.7(c)(ii),
such Tax Proceeding shall be controlled by Purchaser (and Seller shall reimburse
Purchaser for reasonable out-of-pocket expenses incurred by Purchaser or its
Affiliates relating to a Tax Proceeding described in clause (C)), and Seller
agrees to cooperate fully with Purchaser and its Affiliates in pursuing such
contest. Nothing contained herein shall be construed as limiting Purchaser's
right to indemnification under Section 6.8.
(iv) Notwithstanding anything to the contrary in this
Agreement, the procedure for indemnification claims with regard to Taxes of or
relating to the Acquired Entities shall be governed exclusively by this Section
6.7 and Section 6.8.
(d) Cooperation. Following the Closing, Seller, on the one hand, and
Purchaser and the Acquired Entities, on the other hand, agree to furnish or
cause to be furnished to each other or their respective representatives, upon
request, as promptly as practicable, such information and assistance (including
access to Books and Records) relating to the Acquired Entities as is reasonably
necessary for the preparation of any Tax Return, claim for refund, audit or
similar matter, or the
37
prosecution or defense of any Tax Proceeding relating to any proposed adjustment
of Taxes. Purchaser, Seller, the Acquired Entities and their Affiliates shall
retain (or cause to be retained) all Books and Records with respect to Tax
matters pertinent to the Acquired Entities relating to any Pre-Closing Period,
Straddle Period or any taxable period beginning on the Closing Date until the
expiration of the relevant statutory period of limitations for the assessment of
Tax.
(e) Termination of Tax Indemnification Agreements. Seller hereby
agrees and covenants that any and all Tax Indemnification Agreements that may
have been entered into by the Acquired Entities shall be terminated on or before
the Closing Date, and no payments to or from the Acquired Entities pursuant to
any such Tax Indemnification Agreement shall be made after such termination.
(f) Tax Refunds. Any Tax refunds (including applicable interest
thereon) that are received by Purchaser or the Acquired Entities, and any
amounts credited against Taxes to which Purchaser or the Acquired Entities
become entitled, that relate to taxable periods or portions thereof ending on or
before the Closing Date shall be for the account of Seller, and Purchaser shall
notify Seller of any such refund or the amount of any such credit within ten
days after receipt or entitlement thereto and pay over same to Seller within ten
days after receipt or entitlement thereto. Any such refund or credit that
relates to a Straddle Period shall be allocated between the period of such
Straddle Period ending on the Closing Date and the period of such Straddle
Period beginning after the Closing Date in a manner consistent with the
principles for allocating Taxes between such periods set forth in Section
6.7(a)(iii). All Tax refunds (including applicable interest thereon) not
otherwise payable to the Seller under this Section 6.7(f) shall be for the
benefit of Purchaser and if received by or otherwise credited to the Seller or
any Affiliate thereof, the Seller shall notify Purchaser of any such Tax refund
or the amount of any such credit within ten days after receipt or entitlement
thereto and pay over same to Purchaser within ten days after receipt or
entitlement thereto. Purchaser agrees to file any Tax refund claim that Seller
reasonably requests Purchaser to file for any period or portion thereof ending
prior to the Closing Date, provided that Seller shall reimburse Purchaser for
the reasonable costs incurred by Purchaser to file any such claim. Specifically
and in the event that such refund claims are not filed prior to the Closing
Date, Seller agrees (x) to file for a refund of income taxes paid by the
Acquired Entities in their 2002 taxable year by carrying back any net operating
losses incurred by the Acquired Entities in their 2004 taxable year to their
2002 taxable year and (y) to file for a refund of estimated taxes overpaid by
the Acquired Entities with respect to their 2004 taxable year.
(g) Consolidated Return Principles. The federal income Tax Returns
that include the Acquired Entities for the taxable year that ends on the Closing
Date and the taxable year that begins the day after the Closing Date shall be
prepared in accordance with Treasury Regulations Section 1.1502-76(b)(1)(ii)(A).
In addition, the Acquired Entities will incur certain expenses with respect to
the Tender Offer on the Closing Date, including the redemption premium that AHS
will pay to the holders of the Senior Subordinated Notes and fees to service
providers in connection with the Tender Offer (the "Tender Offer Expenses").
Purchaser and Seller agree that the Tender Offer Expenses shall be deducted on
the consolidated federal income Tax Return to be prepared by Seller with respect
to the short federal income taxable year of the Acquired Entities that will end
on and include the Closing Date, and neither Purchaser nor Seller shall take any
position for tax or financial reporting purposes that is inconsistent with the
deduction of the Tender Offer Expenses unless otherwise determined by a court of
competent jurisdiction whose determination is no longer subject to appeal or
further review (it being understood that Seller shall be responsible for
prosecuting and financing any contest relating to such deductibility after
receiving timely notice thereof from Purchaser, and that Purchaser shall be
released from its covenants under this sentence should Seller fail to do so).
Purchaser and Seller further agree that the Acquired Entities shall become
members of the federal income consolidated tax group of which Purchaser is the
common parent on the day after the Closing Date. To the extent applicable, any
state or local income Tax
38
Returns shall be prepared in accordance with provisions comparable to Treasury
Regulations Section 1.1502-76(b)(1)(ii)(A) under state or local Law.
(h) Survival. Notwithstanding anything to the contrary contained in
this Agreement, each of the provisions set forth in this Section 6.7 and Section
6.8 shall survive thirty (30) days after the expiration of the applicable
statute of limitations (taking into account all valid extensions) for the
applicable Taxes or Tax Return to which the provision relates; provided,
however, in the event notice of any claim for indemnification under this
Agreement shall have been given within the applicable survival period, the
provisions that are the subject of the indemnification claim shall survive with
respect to such claims until such time as such claim is finally resolved.
(i) Net Operating Losses. Purchaser and Seller agree that (i) after
the Closing Date the Acquired Entities may have a certain amount of federal "net
operating losses" (within the meaning of Section 172(c) of the Code)
attributable to taxable periods ending on or before the Closing Date (the
"NOLs"); (ii) such NOLs will be carried back to Pre-Closing Periods of the
Acquired Entities to the extent possible under applicable Laws to secure a
refund of Taxes paid, or to reduce or eliminate Taxes otherwise payable, with
respect to such Pre-Closing Periods; (iii) to the extent that such NOLs cannot
be carried back to Pre-Closing Periods, such NOLs will be carried forward to
taxable periods beginning after the Closing Date and Purchaser shall utilize
such NOLs to the extent and as promptly as possible under applicable Laws; and
(iv) in the event that Purchaser or its Affiliates recognize a reduction in
federal Taxes with respect to the utilization of such NOLs for a taxable period
beginning after the Closing Date (a "Tax Benefit"): (A) Purchaser shall promptly
pay to Seller the lesser of the amount of such Tax Benefit or the sum of (x) any
federal Taxes paid by Seller or its Affiliates to any Governmental Authority or
to Purchaser or its Affiliates under Section 6.7(a) with respect to any
Pre-Closing Period or any Straddle Period and (y) any federal Tax
indemnification payments made by Seller or its Affiliates under Section 6.8; (B)
to the extent that the amount of such Tax Benefit exceeds the aggregate amount
of federal Taxes (or indemnification therefor) that Seller and its Affiliates
have paid under Sections 6.7(a) and 6.8, an amount equal to such excess may be
used to offset any future federal Tax liability (or indemnification therefor)
that Seller or its Affiliates may have under Section 6.7(a) or 6.8. Purchaser
will cooperate with Seller and will provide Seller with information as Seller
may reasonably require to determine whether Purchaser or its Affiliates have
recognized a Tax Benefit with respect to the NOLs. In the event of any
disagreement between Seller and Purchaser as to whether Purchaser or its
Affiliates have recognized a Tax Benefit, Seller and Purchaser (after a good
faith attempt to resolve such disagreement) shall submit such disagreement to a
mutually-agreed upon public accounting firm whose decision as to the existence
and amount of such Tax Benefit shall be binding on Seller and Purchaser. Seller
and Purchaser shall equally share the costs of such public accounting firm.
6.8 Tax Indemnification. Seller shall indemnify, defend, and hold harmless
Purchaser from and against any and all Damages for: (i) Transfer Taxes required
to be paid by Seller pursuant to this Agreement; (ii) Taxes of or imposed upon
the Acquired Entities with respect to any Pre-Closing Periods, and for any
Straddle Periods but only with respect to the portion of such Straddle Period
ending on the Closing Date and as determined in the manner provided in Section
6.7 of this Agreement; (iii) Taxes imposed on any member of an affiliated,
consolidated, combined or unitary group of which any of the Acquired Entities
(or any predecessor of any Acquired Entity) is or was a member on or prior to
the Closing Date, including under Treasury Regulations Section 1.1502-6 (and
corresponding provisions of state, local, or foreign Law), for any taxable
period ending on or before, or that includes, the Closing Date, or as a
transferee or successor, pursuant to any Tax Indemnification Agreement, or
similar contract or arrangement, or otherwise; (iv) Taxes imposed on or related
or attributable to (A) the Excluded Assets, (B) the Excluded Subsidiaries, (C)
the Excluded Subsidiaries Sale Transaction or (D) the deduction of the Tender
Offer Expenses to the extent that the disallowance of such deduction of the
Tender Offer Expenses results in a Tax with respect to which Purchaser is
entitled to indemnification pursuant to clause (ii) of this Section 6.8 (it
being
39
understood that this part (D) is intentionally duplicative of such clause (ii));
(v) any breach by Seller of any of the covenants and obligations contained in
Section 6.7 of this Agreement; and (vi) the breach or inaccuracy of the
representations and warranties set forth in Section 3.14 of this Agreement. All
amounts payable or to be paid under this Section 6.8 shall be paid by Seller in
immediately available funds within five (5) Business Days after the receipt of a
written request from Purchaser. The parties hereto agree to treat any payment
made pursuant to this Section 6.8 and Article IX as an adjustment to the
Purchase Price for all Tax purposes, except as required under applicable Law. In
no event shall the indemnities provided for in this Section 6.8 be subject to
the provisions of Article IX of this Agreement.
6.9 Registration of Resale of Purchaser Shares. Within thirty (30) days
after the Closing Date, Purchaser shall file a Registration Statement on Form
S-3 (the "Registration Statement") with the SEC to register the offer and resale
of the Purchaser Shares. Purchaser shall use commercially reasonable efforts to
cause the Registration Statement to be declared effective by the SEC as soon as
reasonably practicable after filing, and in any event within ninety (90) days of
the Closing Date. In addition, Purchaser shall take commercially reasonable
efforts to keep the Registration Statement effective until Seller has sold or
distributed the Purchaser Shares. Purchaser shall also take any action required
to be taken under any applicable state securities laws in connection with the
issuance of the Purchaser Shares and the offer and resale by Seller thereof. The
Registration Statement shall be prepared, filed and maintained in accordance
with the terms and conditions specified in the Registration Rights Agreement to
be entered into between Seller and Purchaser on or prior to the Closing Date, in
substantially the form attached hereto as Exhibit 6.9 (the "Registration Rights
Agreement").
6.10 Public Announcements. Purchaser and Seller will consult with each
other before issuing, and provide each other the opportunity to review, comment
upon and concur with, any press release or other public statements with respect
to the transactions contemplated by this Agreement and shall not issue any such
press release or make any such public statement prior to such consultation,
except as either party may determine is required by applicable Law, court
process or by obligations pursuant to any listing agreement with any national
securities exchange.
6.11 Consultative Process. From and after the date hereof and until the
Closing, Purchaser shall designate an individual or individuals whom Seller may
contact during normal business hours for the purpose of approving actions or
transactions for which the consent of Purchaser is required under this
Agreement. The written approval of a designated individual as contemplated in
this Section 6.11 shall constitute the consent of Purchaser to the transaction
or action so approved. Failure of a designated individual to respond within ten
(10) Business Days of receipt of a written request for such approval shall
constitute the consent of the Purchaser to the transaction or action in
question. Unless and until Purchaser gives written notice to Seller to the
contrary, such designated individuals shall be Xxxxx Xxxxxx and Xxxx Xxxxxx,
each of whom shall be contacted by Seller as contemplated by this Section 6.11.
6.12 Redemption of Untendered Notes. If any Untendered Notes exist
following the Closing, then on the Redemption Date, Purchaser shall cause AHS
to, pursuant to the second paragraph of Section 3.07(b) of the Indenture, redeem
all the Untendered Notes in accordance with the terms and procedures set forth
in Sections 3.01 through 3.05 of the Indenture and take any other action at
Seller's expense reasonably necessary to effect the complete discharge of the
obligations of AHS and the Guarantors under the Indenture (other than any
continuing obligations to the trustee thereunder that by their terms remain
outstanding following any such discharge). Seller agrees to reimburse Purchaser
for all of Purchaser's reasonable and documented out-of-pocket legal fees and
expenses and printing and mailing costs in connection with such redemption and
all fees and expenses of the trustee.
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ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PURCHASER
Except as may be waived by Purchaser, the obligations of Purchaser to
purchase the AHS Shares and to consummate the transactions contemplated hereby
on the Closing Date shall be subject to the satisfaction on or prior to the
Closing Date of the following conditions:
7.1 Representations and Warranties. The representations and warranties of
Seller set forth in this Agreement (i) to the extent qualified by Material
Adverse Effect shall be true and correct and (ii) to the extent not qualified by
Material Adverse Effect shall be true and correct in all material respects as
though made on and as of the Closing Date (except to the extent such
representations speak as of an earlier date, in which case as of such date.)
7.2 Compliance with Agreement. On and as of the Closing Date, Seller and
AHS shall have performed and complied in all material respects with each
covenant and agreement required by this Agreement to be performed and complied
with by them on or before the Closing Date (and Seller and AHS shall have
complied in all material respects with such covenants between the date of the
Original Agreement and the date hereof to the extent Seller and AHS were bound
by such covenants during such period pursuant to the Original Agreement).
7.3 Closing Certificates. Seller shall have delivered to Purchaser a
certificate, dated as of the Closing Date and signed on behalf of Seller and
AHS, respectively, by an authorized officer of each thereof, certifying (a) the
fulfillment of the conditions specified in Sections 7.1 and 7.2 hereof and (b)
that the Untendered Note Amount is the amount of the aggregate Redemption Price
for the Untendered Notes.
7.4 Secretary's Certificates. At the Closing, Purchaser shall have
received copies of the following, in each case certified as of the Closing Date
by a Secretary or an Assistant Secretary of Seller and AHS, respectively:
(a) resolutions of the respective managers or boards of directors of
Seller and AHS authorizing the execution, delivery and performance of this
Agreement and the other agreements that Seller or AHS is required to execute and
deliver pursuant to the terms of this Agreement; and
(b) the signature and incumbency of the respective officers of
Seller and AHS authorized to execute and deliver this Agreement and the other
agreements and certificates that Seller or AHS is required to deliver on or
before the Closing Date pursuant to this Agreement.
7.5 Opinion of Counsel. At the Closing, Purchaser shall have received an
opinion, dated the Closing Date, of Boult Xxxxxxxx Xxxxxxx & Xxxxx, PLC, counsel
for Seller, as to matters for which opinions are customarily given in
transactions of this nature. Such opinion may include qualifications and
assumptions that are customary and appropriate with respect to the substance of
such opinion.
7.6 Consents, Authorizations, Etc. All Permits that are or should be set
forth on Schedules 5.1 and 6.2 hereto that are required to be obtained or given
prior to the Closing shall have been obtained or given, and all applicable
waiting periods with respect thereto shall have expired.
7.7 No Action or Proceeding. On the Closing Date, (a) no judgment, order
or decree of any court or other Governmental Authority restraining, enjoining or
otherwise preventing the consummation of this Agreement or the transactions
contemplated hereby shall be outstanding, and (b) no action, suit, investigation
or proceeding brought by any Governmental Authority shall be pending before any
court or other Governmental Authority to restrain, enjoin or otherwise prevent
41
the consummation of this Agreement or the transactions contemplated hereby,
which action, suit, investigation or proceeding, in the reasonable opinion of
Purchaser, may result in a decision, ruling or finding that individually or in
the aggregate has materially impaired, or would reasonably be expected to
materially impair, the validity or enforceability of this Agreement, or on the
ability of Purchaser to perform its obligations under this Agreement.
7.8 Constituent Documents. Seller shall have delivered to Purchaser true
and complete copies of the respective Constituent Documents of the Acquired
Entities.
7.9 Resignation of Boards of Directors and Officers. Each then-current
officer and/or member of the board of directors of any of the Acquired Entities
as requested by Purchaser pursuant to Section 5.12 shall have tendered his or
her written resignation as an officer and/or director to the applicable Acquired
Entity, such resignations to be effective at or before the Effective Time.
7.10 Good Standing Certificates. At the Closing, Seller shall have
delivered to Purchaser good standing certificates issued with respect to Seller,
AHS and each of the other Acquired Entities issued by the Secretary of State of
the relevant entity's state of incorporation or organization. Each such good
standing certificate shall be dated as of a date that is not more than twenty
(20) days prior to the Closing Date.
7.11 Non-Imputation Endorsements. If Purchaser elects to obtain title
commitments for the issuance of title policies or endorsements on any of the
Real Property, Seller shall have delivered to the title company such affidavits,
a form of which is attached hereto as Exhibit 7.11, as may be reasonably
acceptable to Seller in order for the title company to issue non-imputation
endorsements.
7.12 Termination of Guarantees. Except for guarantees pursuant to
physician agreements which have been entered into in the ordinary course of
business, all guarantees (other than guarantees under the Indenture which will
be released upon completion of the Tender Offer and/or the Redemption of any
Untendered Notes) executed by the Acquired Entities shall have been terminated.
7.13 Non-Competition Agreement. Seller shall have executed and delivered
the Non-Competition Agreement to Purchaser.
7.14 FIRPTA. Purchaser shall have received from Seller a copy of a
statement, dated not earlier than thirty (30) days before the Closing Date,
issued by Seller that complies with the requirements of Section 1.1445-2(c)(3)
of the Treasury Regulations and certifies that Seller is not a foreign person.
7.15 Waiver of Conditions. Purchaser may waive any condition of this
Article VII to the extent permitted by applicable Law. Except as otherwise
provided herein, the consequences of any knowing waiver shall be (a) the
elimination of the waived condition as a valid basis for Purchaser to refuse to
close the transactions contemplated by this Agreement, and (b) the release of
Seller from any claim by Purchaser for resulting injuries and Damages with
respect to that waived condition.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER
Except as may be waived in writing by Seller, the obligations of Seller to
consummate the transactions contemplated hereby on the Closing Date shall be
subject to the satisfaction on or prior to the Closing Date of the following
conditions:
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8.1 Representations and Warranties. The representations and warranties of
Purchaser set forth in this Agreement shall be true and correct in all material
respects as though made on and as of the Closing Date (except to the extent such
representations speak as of an earlier date, in which case as of such date.)
8.2 Compliance with Agreement. On and as of the Closing Date, Purchaser
shall have performed and complied in all material respects with each covenant
and agreement required by this Agreement to be performed and complied with by it
on or before the Closing Date (and Purchaser shall have complied in all material
respects with such covenants between the date of the Original Agreement and the
date hereof to the extent Purchaser was bound by such covenants during such
period pursuant to the Original Agreement).
8.3 Closing Certificates. Purchaser shall have delivered to Seller a
certificate, dated as of the Closing Date and signed on behalf of Purchaser by
an authorized officer thereof, certifying the fulfillment of the conditions
specified in Sections 8.1 and 8.2 hereof.
8.4 Secretary's Certificate. At the Closing, Seller shall have received
copies of the following, in each case certified as of the Closing Date by a
Secretary or an Assistant Secretary of Purchaser:
(a) resolutions of the board of directors of Purchaser authorizing
the execution, delivery and performance of this Agreement and the other
agreements that Purchaser is required to execute and deliver pursuant to the
terms of this Agreement;
(b) the signature and incumbency of the officers of Purchaser
authorized to execute and deliver this Agreement and the other agreements and
certificates that Purchaser is required to deliver on or before the Closing Date
pursuant to this Agreement.
8.5 Opinion of Counsel. At the Closing, Seller shall have received an
opinion, dated the Closing Date, of Xxxxxx Xxxxxxx Xxxxxx & Xxxxx, PLLC, counsel
for Purchaser, as to matters for which opinions are customarily given in
transactions of this nature. Such opinion may include qualifications and
assumptions that are customary and appropriate with respect to the substance of
such opinion.
8.6 Consents, Authorizations, Etc. All Permits that are or should be set
forth on Schedules 5.1 and 6.2 hereto that are required to be obtained or given
prior to the Closing shall have been obtained or given, and all applicable
waiting periods with respect thereto shall have expired.
8.7 No Action or Proceeding. On the Closing Date, (a) no judgment, order
or decree of any court or other Governmental Authority restraining, enjoining or
otherwise preventing the consummation of this Agreement or the transactions
contemplated hereby shall be outstanding, and (b) no action, suit, investigation
or proceeding brought by any Governmental Authority shall be pending before any
court or other Governmental Authority or threatened by any Governmental
Authority to restrain, enjoin or otherwise prevent the consummation of this
Agreement or any of the transactions contemplated hereby, which action, suit,
investigation or proceeding, in the reasonable opinion of Seller, may result in
a decision, ruling or finding that individually or in the aggregate has
materially impaired, or would reasonably be expected to materially impair, the
validity or enforceability of this Agreement, or on the ability of Seller or AHS
to perform their respective obligations under this Agreement.
8.8 Good Standing Certificate. At the Closing, Purchaser shall have
delivered to Seller a good standing certificate issued with respect to Purchaser
by the Secretary of State of Purchaser's
43
state of incorporation. Such good standing certificate shall be dated as of a
date that is not more than twenty (20) days prior to the Closing Date.
8.9 Registration Rights Agreement. Purchaser shall have executed and
delivered the Registration Rights Agreement to Seller.
8.10 Tender Offer. Not less than a majority of the aggregate principal
amount of the Senior Subordinated Notes shall have been tendered in the Tender
Offer and the Indenture Amendments shall have been approved and become
effective.
8.11 Waiver of Conditions. Seller may waive any conditions of this Article
VIII to the extent permitted by applicable Law. Except as otherwise provided
herein, the consequences of any knowing waiver shall be (a) the elimination of
the waived condition as a valid basis for Seller to refuse to close the
transactions contemplated by this Agreement, and (b) the release of Purchaser
from any claim by Seller for resulting injuries and Damages with respect to that
waived condition.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by Seller. Subject to the provisions of this Article
IX, Seller shall indemnify and hold harmless Purchaser, any Affiliate of
Purchaser, the respective officers, directors, stockholders, employees, agents
and representatives of Purchaser and its Affiliates, and each such Person's
respective successors and assigns (each, a "Purchaser Indemnitee") from and
after the Effective Time from and against any Damages incurred or suffered by
such Purchaser Indemnitee as a result of or arising from (a) any breach,
misrepresentation or inaccuracy in any of the representations and warranties
made herein by Seller, other than the representations and warranties contained
in Section 3.14, (b) any breach of any of the covenants or agreements made
herein by Seller, other than the covenants contained in Sections 6.7 and 6.8,
(c) any claims, actions, suits or other proceedings arising out of any of the
Excluded Liabilities and (d) any claims, actions, suits or other proceedings
arising out of the Excluded Subsidiaries Sale Transaction. The sole recourse of
a Purchaser Indemnitee for any and all Damages relating to or arising from a
breach of any of the representations, covenants or agreements contained in
Section 3.14 or Section 6.7 shall be controlled by the provisions of Section
6.8.
9.2 Indemnification by Purchaser. Purchaser shall indemnify and hold
harmless Seller, any Affiliate of Seller, the respective officers, directors,
managers, members, employees, agents and representatives of Seller and their
respective Affiliates, and each such Person's respective successors and assigns
(each a "Seller Indemnitee") from and after the Effective Time from and against
any Damages incurred or suffered by such Seller Indemnitee as a result of or
arising from (a) any breach, misrepresentation or inaccuracy in any of the
representations and warranties made herein by Purchaser, (b) any breach of any
of the covenants or agreements made herein by Purchaser, (c) any claims,
actions, suits or other proceedings relating solely to the operations of the
Acquired Entities after the Effective Time and (d) any claims, actions, suits or
proceedings arising out of any post-Closing obligation or action on the part of
the Acquired Entities under any Contract which is not an Excluded Liability.
9.3 Claims Procedures. In the case of any Damages for which
indemnification is sought hereunder, the party seeking indemnification (the
"Indemnitee") shall promptly notify the party from whom indemnification is
sought (the "Indemnifying Party") in writing of the existence and nature of such
Damages, as well as the claim, demand, action or proceeding, if any, out of
which the Damages arise (a "Claim"); provided, however, that no failure or delay
by the Indemnitee in the performance of the foregoing shall reduce or otherwise
affect the obligation of the Indemnifying Party to indemnify and hold the
Indemnitee harmless, except to the extent the Indemnitee's failure to give or
delay in
44
giving the required notice materially impairs the Indemnifying Party's ability
to indemnify, defend or mitigate its Damages, in which case the Indemnifying
Party shall have no obligation to indemnify the Indemnitee to the extent of
Damages, if any, caused by such failure to give or delay in giving the required
notice. If such Damages arise out of a Claim by a third party, the Indemnitee
must give the Indemnifying Party a reasonable opportunity to defend the same or
prosecute such action to conclusion or settlement satisfactory to the
Indemnifying Party at the Indemnifying Party's sole cost and expense and with
counsel of its own selection, and the Indemnifying Party shall pay any resulting
settlements (including all associated Damages), satisfy any judgments or comply
with any decrees; provided, further, however, that the Indemnitee shall at all
times also have the right fully to participate in the defense at Indemnitee's
sole cost and expense so long as such participation occurs without hindering or
impairing the defense of the Indemnifying Party. Notwithstanding the foregoing,
without the prior written consent of the Indemnitee, the Indemnifying Party
shall not compromise or settle any Claim if (i) the terms thereof impose any
liability or obligations on the Indemnitee or (ii) the terms thereof fail to
include an unconditional general release of the Indemnitee with respect to all
liabilities and obligations in respect of such Claim. If the Indemnifying Party
shall, within a reasonable time after said notice, fail to defend, the
Indemnitee shall have the right, but not the obligation, and without waiving any
rights against the Indemnifying Party, to undertake the defense of, and with the
consent of the Indemnifying Party (such consent not to be withheld
unreasonably), to compromise or settle the Claim on behalf, for the account, and
at the risk and expense, of the Indemnifying Party and shall be entitled to
collect the amount of any settlement or judgment or decree and all costs and
expenses (including, without limitation, reasonable attorneys' fees) in
connection therewith from the Indemnifying Party. Except as provided in the
preceding sentence, the Indemnitee shall not compromise or settle any Claim.
9.4 Limitations on Claims.
(a) Liability Thresholds. Notwithstanding anything in this Article
IX to the contrary, no Damages with respect to Claims arising out of this
Article IX shall be payable pursuant to this Article IX unless and until the
aggregate amount of Damages asserted against the Indemnifying Party under this
Article IX with respect to such Claims equals or exceeds an amount equal to
$5,000,000.00 (the "Liability Threshold"). Once the Liability Threshold for such
Claims has been reached, the Indemnitee shall be entitled to indemnity under
this Article IX for any and all Damages exceeding the Liability Threshold;
provided, however, that with respect to Claims for indemnification pursuant to
Section 9.1(a), 9.1(b), 9.2(a) or 9.2(b), the aggregate amount of each of
Seller's and Purchaser's respective liability under Article IX shall not exceed
$84,000,000.00. Notwithstanding anything in this Agreement to the contrary,
Seller's or Purchaser's liability for Claims for indemnification pursuant to
Sections 9.1(c), 9.1(d), 9.2(c) or 9.2(d) shall not be subject to any Liability
Threshold, liability cap or time limitation (other than limitations imposed by
Law or common law).
(b) Subrogation. Following full indemnification as provided for
hereunder, the Indemnifying Party shall be subrogated to all rights of the
Indemnitee with respect to all Persons relating to the matter for which
indemnification has been made.
(c) Survival of Representations and Warranties; Limitation of Time
to Bring Claims. The representations and warranties set forth in this Agreement
shall survive the Closing and shall expire eighteen (18) months after the
Effective Time, other than those set forth in Section 3.14 which shall survive
until thirty (30) days after the expiration of the applicable statute of
limitations (taking into account all valid extensions). No Claim for
indemnification arising out of a breach of representations and warranties in
this Agreement may be brought after the applicable time provided for in this
Section 9.4(c).
45
9.5 Insured Losses. The amount of any Damages for which indemnification is
provided under this Article IX shall be net of any duplicative amounts recovered
by the Indemnitee under insurance policies or from unaffiliated third Persons
with respect to such Damages.
ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual written consent of Purchaser and Seller;
(b) by either Purchaser or Seller, by notice in writing to the other
party if a Governmental Authority shall have permanently enjoined, restrained or
otherwise prohibited the consummation of the transactions contemplated by this
Agreement;
(c) by either Seller or Purchaser if the Closing shall not have
occurred by August 31, 2005; provided, however, that the right to terminate this
Agreement under this Section 10.1(c) shall not be available to any party whose
breach of its representations and warranties in this Agreement or whose failure
to perform any of its covenants and agreements under this Agreement shall have
been a contributing cause of, or resulted in, the failure of the Closing to
occur on or before such date;
(d) by Purchaser, if Seller or AHS shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach or
failure to perform (a) would give rise to the failure of a condition set forth
in Sections 7.1 or 7.2, and (b) cannot be or has not been cured within ten (10)
Business Days after Purchaser's giving written notice to Seller of such breach
(a "Seller Material Breach") (provided that Purchaser is not then in Purchaser
Material Breach); or
(e) by Seller, if Purchaser shall have breached or failed to perform
in any material respect any of its representations, warranties, covenants or
other agreements contained in this Agreement, which breach or failure to perform
(a) would give rise to the failure of a condition set forth in Sections 8.1 or
8.2, and (b) cannot be or has not been cured within ten (10) Business Days after
Seller's giving written notice to Purchaser of such breach (a "Purchaser
Material Breach") (provided that Seller is not then in Seller Material Breach).
10.2 Effect of Termination. In the event of termination of this Agreement
by either Seller or Purchaser pursuant to Section 10.1, this Agreement shall
become void and have no effect without any liability or obligation on the part
of Purchaser or Seller, except for the obligations and provisions set forth in
Sections 10.2, 12.1, 12.6, 12.7, 12.8 and 12.12. Moreover, in the event of
termination of this Agreement pursuant to Section 10.1(c), (d) or (e), nothing
herein shall prejudice the ability of the non-breaching party from seeking
damages from any other party for any breach of this Agreement, including without
limitation, attorneys' fees and the right to pursue any remedy at law or in
equity.
ARTICLE XI
NOTICES
11.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person or
received by telegraphic or other electronic means (including facsimile, telecopy
and telex) or when delivered by overnight courier, or if mailed, five (5) days
after being deposited in the United States mail, certified or registered mail,
46
first-class postage prepaid, return receipt requested, to the parties at the
following addresses or facsimile numbers:
If to Seller, to:
Ardent Health Services LLC
Xxx Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxxx
Fax: (000) 000-0000
With copies to:
Boult Xxxxxxxx Xxxxxxx & Xxxxx, PLC
Suite 700
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
If to Purchaser, to:
Psychiatric Solutions, Inc.
000 Xxxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Fax: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxxx Xxxxxx & Xxxxx, PLLC
Nashville City Center
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
Any party from time to time may change its address or facsimile number for
the purpose of receipt of notices to that party by giving a similar notice
specifying a new address or facsimile number to the other notice parties listed
above in accordance with the provisions of this Section 11.1.
ARTICLE XII
MISCELLANEOUS
12.1 Fees and Expenses. Except as otherwise provided in this Agreement,
Seller shall pay its own expenses (including, without limitation, the expenses
of the Acquired Entities in connection with this Agreement and the transactions
contemplated hereby incurred prior to the Effective Time) and Purchaser shall
pay its own expenses (including, without limitation, the fees and expenses of
the Lender in connection with this Agreement, and also including those of the
Acquired Entities in connection with this Agreement and the transactions
contemplated hereby incurred after the Effective Time) in connection with this
Agreement and the transactions contemplated hereby. Notwithstanding the
foregoing, Purchaser shall be responsible for the costs of any surveys, title
47
policies, environmental surveys and any audits of the Company's financial
statements required in connection with this Agreement and the transactions
contemplated hereby. Purchaser shall pay the fees and expenses, including
counsel fees and filing fees, with respect to the preparation and filing of its
notifications under the HSR Act. Further, and notwithstanding the foregoing,
Purchaser will bear all reasonable costs and expenses, including attorneys' fees
of all parties, resulting from or relating to any investigation or challenge of
the transactions contemplated hereby initiated by the United States Federal
Trade Commission, the United States Department of Justice or the Attorney
General of any state on, prior to or after the Closing under antitrust or
similar laws, including reasonable costs and expenses resulting from or relating
to any "second request" issued in connection with the parties' HSR Act filings
made in connection with the transactions contemplated hereby.
12.2 Entire Agreement. Except for documents and agreements executed
pursuant hereto, the provisions of the Confidentiality Agreement (which
Confidentiality Agreement shall survive the parties' execution and delivery of
this Agreement) and the other documents and agreements contemplated hereby, this
Agreement supersedes all prior oral discussions and written agreements between
the parties with respect to the subject matter of this Agreement (including any
term sheet or similar agreement or document relating to the transactions
contemplated hereby). Except for the Confidentiality Agreement, this Agreement,
including the exhibits and schedules hereto and other documents and agreements
delivered in connection herewith, contains the sole and entire agreement between
the parties hereto with respect to the subject matter hereof.
12.3 Waiver. Any term or condition of this Agreement may be waived at any
time by the party which is entitled to the benefit thereof. Any such waiver must
be in writing and must be duly executed by such party. A waiver on one occasion
shall not be deemed to be a waiver of the same or any other breach, provision or
requirement on any other occasion.
12.4 Amendment. This Agreement may be modified or amended only by a
written instrument duly executed by each of the parties hereto.
12.5 Counterparts; Facsimile Signatures. This Agreement may be executed
simultaneously in any number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same instrument.
Facsimile signatures on this Agreement shall be deemed to be original signatures
for all purposes.
12.6 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of Seller, Purchaser and their
respective successors or assigns, and it is not the intention of the parties to
confer third party beneficiary rights upon any other Person.
12.7 GOVERNING LAW, CONSTRUCTION. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. The parties
hereto agree that no provisions of this Agreement or any related document shall
be construed for or against or interpreted to the advantage or disadvantage of
any party hereto by any court or other Governmental Authority by reason of any
party's having or being deemed to have structured or drafted such provision,
each party having participated equally in the structuring and drafting hereof.
12.8 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns,
including successors by merger or otherwise.
12.9 No Assignment. Neither this Agreement nor any right hereunder or part
hereof may be assigned by any party hereto without the prior written consent of
the other parties hereto; provided, however, that Seller and AHS, on the one
hand, and Purchaser, on the other hand, may
48
assign their respective rights and obligations under this Agreement to other
Persons who (a) are wholly-owned (directly or indirectly) by Seller or
Purchaser, respectively, and (b) agree to be bound by the terms and conditions
of this Agreement. Notwithstanding the foregoing, Purchaser may assign its
rights and obligations under this Agreement to the administrative agent for the
benefit of the lenders as collateral for all obligations under Purchaser's
senior credit facility, as it may exist from time to time. Notwithstanding the
assignment of this Agreement or any rights or obligations hereunder, the
assignor shall be jointly and severally liable with its assignee for its
obligations hereunder.
12.10 Headings, Gender, Etc. The headings used in this Agreement have been
inserted for convenience and do not constitute provisions to be construed or
interpreted in connection with this Agreement. Unless the context of this
Agreement otherwise requires, (a) words of any gender will be deemed to include
each other gender, (b) words using the singular or plural number also will
include the plural or singular number, respectively, (c) the terms "hereof",
"herein", "hereby" and derivative or similar words will refer to this entire
Agreement, and (d) the terms "Article," "Section," "Schedule" and "Exhibit" will
refer to the specified Article or Section of this Agreement or the specified
Schedule or Exhibit to this Agreement.
12.11 Access to Information. Seller and Purchaser agree that, from time to
time after the Closing, upon the reasonable request of another party hereto,
they will cooperate and will cause its respective subsidiaries to cooperate with
each other to effect the orderly transition of the business, operations and
affairs of the Acquired Entities. Without limiting the generality of the
foregoing, (a) Seller will give and will cause its subsidiaries to give
representatives of the Acquired Entities reasonable access to all Books and
Records of Seller reasonably requested by the Acquired Entities or Purchaser in
the preparation of any post-Closing financial statements, reports or Tax Returns
of the Acquired Entities; and (b) Purchaser will give and will cause the
Acquired Entities to give representatives of Seller reasonable access to all
Books and Records of the Acquired Entities reasonably requested by Seller in the
preparation of any post-Closing financial statements, reports or Tax Returns of
Seller.
12.12 Severability; Invalid Provisions. If any provision of this Agreement
is held to be illegal, invalid or unenforceable under any present or future Law,
(a) such provisions will be fully severable; (b) this Agreement will be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof; (c) the remaining provisions of this
Agreement will remain in full force and effect and will not be affected by the
illegal, invalid or unenforceable provision or by its severance herefrom; and
(d) in lieu of such illegal, invalid or unenforceable provision, there will be
added automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible.
12.13 Cooperation. Upon request, each of the parties hereto shall
cooperate with the other in good faith, at the requesting party's expense, in
furnishing information, testimony and other assistance in connection with any
actions, proceedings, arrangements, or disputes involving any of the parties
hereto (other than in a dispute among such parties or entities) and based upon
contracts, arrangements or acts of Seller, AHS, or the Acquired Entities which
were in effect or occurred prior to the Effective Time and which relate to the
business of the Acquired Entities. Purchaser shall cause the Acquired Entities
to provide any information or documents reasonably requested by Seller in
connection with Tax or other disputes, settlements, investigations, proceeding
or other matters in respect of any period ending at or prior to the Effective
Time. The party requesting documents or information pursuant to this Section
shall pay all fees and expenses paid to unaffiliated third parties by the party
providing such documents or information in connection with providing such
information or document. In addition, following the Closing, the parties hereto
shall cooperate fully with each other and make available to the other, as
reasonably requested, and to any taxing authority, all
49
information, records, documents relating to Tax liabilities or potential Tax
liabilities and Tax basis of the Acquired Entities, and shall preserve all such
information, records and documents at least until the expiration of any
applicable statute of limitations or extensions thereof.
12.14 Further Assurance Clause. On and after the Closing Date, Seller, the
Acquired Entities and Purchaser will take all appropriate action and execute all
documents, instruments or conveyances of any kind which may be reasonably
necessary or advisable to carry out any of the provisions hereof, including,
without limitation, putting Purchaser in possession and operating control of the
business of the Acquired Entities.
12.15 Schedules and Other Instruments. Each Schedule and Exhibit to this
Agreement shall be considered a part hereof as if set forth herein in full.
Seller and Purchaser shall each have the right through two (2) business days
prior to the Closing Date to supplement the Schedules prepared by it, other than
Schedule 6.5 which cannot be amended or supplemented without the written consent
of Purchaser and Seller, so that the representations and warranties shall be
true and correct as of the Closing; provided that such supplemental disclosure
shall, in the aggregate, taken together with the Schedules accompanying this
Agreement when first executed (the "Original Schedules"), not disclose any state
of affairs having, individually or in the aggregate, a Material Adverse Effect
not disclosed on the Original Schedules. In the event that such supplemental
disclosures reflect a state of affairs having, individually or in the aggregate,
a Material Adverse Effect, then the condition in Section 7.1 or Section 8.1, as
the case may be, shall be deemed not to be satisfied. For purposes of this
Section 12.15, when determining whether the supplemental disclosure has a
Material Adverse Effect on Purchaser, there shall be a substitution of the term
"Purchaser and its subsidiaries" for the phrase "Acquired Entities" in the
definition of Material Adverse Effect.
[THE FOLLOWING PAGE IS THE SIGNATURE PAGE.]
50
IN WITNESS WHEREOF, the parties have caused this Stock Purchase Agreement
to be executed as of the date first above written.
PSYCHIATRIC SOLUTIONS, INC.
By: /s/ Xxxx X. Xxxxxx
------------------------
Name: Xxxx X. Xxxxxx
Title: President and Chief
Executive Officer
ARDENT HEALTH SERVICES LLC
By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Senior Vice President
ARDENT HEALTH SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Senior Vice President
--------------------------------------------------------------------------------
AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
by and among
ARDENT HEALTH SERVICES LLC,
ARDENT HEALTH SERVICES, INC.
and
PSYCHIATRIC SOLUTIONS, INC.
Dated as of June 30, 2005
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS................................................................ 1
ARTICLE II PURCHASE AND SALE; CLOSING................................................ 9
2.1 Sale of the AHS Shares............................................. 9
2.2 Excluded Assets and Liabilities; Certain Included Liabilities...... 9
2.3 Purchase Price..................................................... 10
2.4 Loan Amount........................................................ 10
2.5 Closing............................................................ 10
2.6 Closing Deliveries................................................. 10
2.7 Repayment of Seller Promissory Note................................ 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER................................. 11
3.1 Organization of Seller............................................. 11
3.2 Organization and Capitalization of AHS............................. 11
3.3 Organization and Capitalization of the AHS Subsidiaries............ 11
3.4 Authorization...................................................... 12
3.5 No Conflicting Agreements; Consents................................ 13
3.6 Financial Statements............................................... 13
3.7 Absence of Undisclosed Liabilities................................. 14
3.8 Absence of Certain Changes......................................... 14
3.9 Legal Proceedings, etc............................................. 15
3.10 Contracts; No Defaults............................................. 15
3.11 Title to Property.................................................. 16
3.12 Employees; Labor Matters; Employee Benefit Plans; ERISA............ 17
3.13 Bank Accounts...................................................... 19
3.14 Taxes.............................................................. 19
3.15 Insurance.......................................................... 21
3.16 Intellectual Property.............................................. 21
3.17 Compliance with Laws............................................... 21
3.18 Environmental Matters.............................................. 22
3.19 Books and Records.................................................. 22
3.20 No Material Adverse Change......................................... 22
3.21 Brokers............................................................ 22
3.22 HIPAA Matters...................................................... 22
3.23 Medical Waste...................................................... 23
3.24 Certificates of Need............................................... 23
3.25 Medicare Participation; Accreditation.............................. 24
3.26 Compliance Program................................................. 24
3.27 Regulatory Compliance.............................................. 24
3.28 Medical Staff Matters.............................................. 25
i
3.29 Third Party Payor Cost Reports..................................... 25
3.30 Reimbursement...................................................... 26
3.31 Statutory Funds.................................................... 26
3.32 Investment Representations......................................... 26
3.33 Controlled Substances.............................................. 26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER............................... 27
4.1 Organization....................................................... 27
4.2 Corporate Authorization............................................ 27
4.3 Capitalization..................................................... 27
4.4 No Conflicting Agreements; Consents................................ 27
4.5 Legal Proceedings, etc............................................. 28
4.6 Brokers............................................................ 28
4.7 Investment Representations......................................... 28
4.8 SEC Filings; Financial Statements.................................. 28
4.9 Financing.......................................................... 29
4.10 No Material Adverse Change......................................... 29
ARTICLE V COVENANTS OF SELLER........................................................ 29
5.1 Regulatory Approvals............................................... 29
5.2 Conduct Prior to the Closing....................................... 30
5.3 Employee Matters................................................... 31
5.4 Access by Purchaser................................................ 31
5.5 Financial Statements and Reports................................... 31
5.6 Closing Conditions................................................. 32
5.7 Transfer of Assets................................................. 32
5.8 Encumbrances....................................................... 32
5.9 Condition of Assets................................................ 32
5.10 Intercompany Accounts.............................................. 32
5.11 Exclusivity........................................................ 32
5.12 Resignations....................................................... 32
5.13 Company Plans...................................................... 33
5.14 Non-Competition Agreement.......................................... 33
5.15 Notice of Certain Occurrences...................................... 33
5.16 Amendment of Management Agreements................................. 33
ARTICLE VI COVENANTS OF PURCHASER; CERTAIN ADDITIONAL COVENANTS OF THE PARTIES....... 34
6.1 Notice of Certain Occurrences...................................... 34
6.2 Regulatory Approvals............................................... 34
6.3 Books and Records.................................................. 34
6.4 Closing Conditions................................................. 34
6.5 Employee Matters................................................... 34
6.6 WARN Act Compliance; COBRA......................................... 35
6.7 Tax Matters........................................................ 35
ii
6.8 Tax Indemnification................................................ 39
6.9 Registration of Resale of Purchaser Shares......................... 40
6.10 Public Announcements............................................... 40
6.11 Consultative Process............................................... 40
6.12 Redemption of Untendered Notes..................................... 40
ARTICLE VII CONDITIONS TO OBLIGATIONS OF PURCHASER................................... 41
7.1 Representations and Warranties..................................... 41
7.2 Compliance with Agreement.......................................... 41
7.3 Closing Certificates............................................... 41
7.4 Secretary's Certificates........................................... 41
7.5 Opinion of Counsel................................................. 41
7.6 Consents, Authorizations, Etc...................................... 41
7.7 No Action or Proceeding............................................ 41
7.8 Constituent Documents.............................................. 42
7.9 Resignation of Boards of Directors and Officers.................... 42
7.10 Good Standing Certificates......................................... 42
7.11 Non-Imputation Endorsements........................................ 42
7.12 Termination of Guarantees.......................................... 42
7.13 Non-Competition Agreement.......................................... 42
7.14 FIRPTA............................................................. 42
7.15 Waiver of Conditions............................................... 42
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF SELLER..................................... 42
8.1 Representations and Warranties..................................... 43
8.2 Compliance with Agreement.......................................... 43
8.3 Closing Certificates............................................... 43
8.4 Secretary's Certificate............................................ 43
8.5 Opinion of Counsel................................................. 43
8.6 Consents, Authorizations, Etc...................................... 43
8.7 No Action or Proceeding............................................ 43
8.8 Good Standing Certificate.......................................... 43
8.9 Registration Rights Agreement...................................... 44
8.10 Tender Offer....................................................... 44
8.11 Waiver of Conditions............................................... 44
ARTICLE IX INDEMNIFICATION........................................................... 44
9.1 Indemnification by Seller.......................................... 44
9.2 Indemnification by Purchaser....................................... 44
9.3 Claims Procedures.................................................. 44
9.4 Limitations on Claims.............................................. 45
9.5 Insured Losses..................................................... 46
ARTICLE X TERMINATION................................................................ 46
10.1 Termination........................................................ 46
iii
10.2 Effect of Termination.............................................. 46
ARTICLE XI NOTICES................................................................... 46
11.1 Notices............................................................ 46
ARTICLE XII MISCELLANEOUS............................................................ 47
12.1 Fees and Expenses.................................................. 47
12.2 Entire Agreement................................................... 48
12.3 Waiver............................................................. 48
12.4 Amendment.......................................................... 48
12.5 Counterparts; Facsimile Signatures................................. 48
12.6 No Third Party Beneficiary......................................... 48
12.7 GOVERNING LAW, CONSTRUCTION........................................ 48
12.8 Binding Effect..................................................... 48
12.9 No Assignment...................................................... 48
12.10 Headings, Gender, Etc.............................................. 49
12.11 Access to Information.............................................. 49
12.12 Severability; Invalid Provisions................................... 49
12.13 Cooperation........................................................ 49
12.14 Further Assurance Clause........................................... 50
12.15 Schedules and Other Instruments.................................... 50
iv
